Snap Shares Dive 8% as AI Deal Collapses and Activist Pressure Grows

Snap ended a major AI partnership, prompting investors to sell. Shares dropped 8% in premarket trading after the company confirmed it ended a $400 million AI search deal with Perplexity. Ending this deal means Snap will not add Perplexity’s AI search technology to its platform, which was expected to drive new features, user engagement, and revenue growth. The termination may also increase pressure from activist investors.

By ending the Perplexity deal, Snap loses a major AI opportunity as it will not add Perplexity’s AI search to its platform or receive the $400 million payment. This directly affects Snap’s short-term revenue and reduces the likelihood of launching new AI-driven features that could have increased user engagement and offset lost revenue. Both companies described the split as friendly, and Perplexity will continue using Snap’s advertising products. Even so, this loss underscores the challenges Snap faces as it tries to grow.

Snap reported a net loss of $89 million, beating expectations. Revenue rose 12% to $1.53 billion. Despite this, concern remains over Snap’s outlook after ending the Perplexity deal.

The deal termination increases pressure from activist investor Irenic Capital Management, which wants faster cost cuts and a clear plan for Snap’s Specs unit. Despite recent workforce reductions, activist demands for bigger changes have not been met.

Snap shares have dropped 26% over the past year, putting the company in a more difficult position as it competes for digital advertising budgets with much larger and better-funded rivals.