Snap and Perplexity cancel $400M AI search deal, ending Snapchat integration plans

Snap and Perplexity Amicably Terminated Partnership Worth $400 Million

Snap disclosed during its Q1 2026 earnings report that it has ended its high-profile partnership with AI startup Perplexity, effectively canceling plans to integrate Perplexity's AI search engine into Snapchat1

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. The Snap Perplexity deal, announced in November 2025, was valued at $400 million in cash and equity to be paid over one year3

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. Snap stated that the companies "amicably ended the relationship in Q1" and confirmed its sales guidance "assumes no contribution from Perplexity"1

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. The partnership was expected to begin contributing to revenue in 2026, but those plans have now been shelved entirely.

Perplexity told the Wall Street Journal that both companies determined the collaboration didn't fit their product goals5

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. Despite ending the AI integration plans, Perplexity emphasized it "continues to value Snapchat as a platform for reaching key audiences, remains active on the Snap platform, and expects to continue using Snap's advertising products"5

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. This suggests the relationship between the companies hasn't soured completely, even as the core partnership dissolves.

What the Snapchat Integration Would Have Delivered

The proposed Snapchat integration aimed to bring Perplexity's AI answering engine directly into Snapchat's Chat interface, allowing users to ask questions and receive conversational, source-backed answers without leaving the app2

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. Perplexity CEO Aravind Srinivas had announced in a November post that Perplexity would become the default AI for all Snapchat users starting in January 2026, with plans to work on many more projects together5

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Snap CEO Evan Spiegel said at the time of the announcement that the deal reflected the company's vision to use AI to enhance discovery on Snapchat1

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. The partnership was also expected to support Snap's advertising business by creating stronger monetisation opportunities through tapping into user engagement and intent4

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. Although testing was conducted with select users, Snap indicated in February that a path for a broader rollout had not been mutually agreed upon between the companies3

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Snap Still Pursues AI Despite Canceled Deal

The end of the $400 million deal doesn't mean Snap is abandoning AI altogether. The company recently introduced AI Sponsored Snaps, an ad format that lets brands place interactive AI chatbots inside Chat2

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. During Q1, Snapchat launched this format to let brands engage users through interactive, AI-powered conversations5

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. This indicates that chatbot-style conversations may still appear in Snapchat, but through ads instead of AI search functionality.

The cancellation comes as tech companies race to embed AI assistants across their platforms. Meta has added Meta AI to WhatsApp, Instagram, Facebook, and Messenger, while Google has been building Gemini into Search, Android, Gmail, and other products2

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. Snap appeared to be taking the same route with Perplexity, attempting to position AI search as a core feature for its hundreds of millions of daily users.

Strong Earnings Report Despite Partnership Dissolution

Snap reported stronger first-quarter results alongside the partnership announcement. Revenue rose 12% to reach $1.5 billion, supported by resilient advertising spending and growth in daily active users (DAU), especially in markets outside North America and Europe4

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. The company's net loss narrowed to $89 million from $140 million a year earlier4

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Snap daily active users rose 5% year-over-year to 483 million, while monthly active users increased 5% to reach 965 million1

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. The company attributed the revenue growth to new features across the app, including Snap Map and its Lenses AR filters1

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. Evan Spiegel stated, "In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow"3

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What's Next for Snap and Its AI Strategy

Snap expects second-quarter revenue to come in between $1.52 billion and $1.55 billion, with the midpoint close to analyst estimates of $1.54 billion4

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. The company remains focused on disciplined execution as it invests in Specs and its long-term opportunity in intelligent eyewear, with plans to share more at the Augmented World Expo (AWE) on June 163

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The development comes nearly a month after Snap announced plans to cut 1,000 jobs, around 16% of its global workforce, citing AI advancements as the reason for the job cuts4

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. These moves suggest Snap is recalibrating its approach to AI, potentially focusing on internal development and strategic advertising products rather than external partnerships. The question remains whether Snap will seek other AI assistants to fill the gap left by Perplexity, or whether the company will double down on building proprietary AI capabilities that better align with its vision for user engagement and monetisation opportunities.