Snap Inc. confirmed that the $400 million agreement it signed with AI search firm Perplexity has been dissolved. The two parties announced the partnership in November, promising to weave Perplexity’s conversational search engine into Snapchat and to start seeing revenue from the feature in early 2026. A help page later revealed that the feature never moved beyond a testing phase, and Snap’s latest earnings report noted the relationship ended "amicably" earlier this year.

Snap’s statement said the two sides had not been able to agree on a broader rollout path. Perplexity echoed that sentiment, describing the original implementation as "not the right fit" for either company’s product goals. The startup added that it will continue to use Snapchat as an advertising platform and remains active on the app, but the joint AI search feature will not be pursued further.

With the Perplexity deal off the table, Snap is pivoting toward other AI‑driven revenue streams. The company recently launched "AI‑Sponsored Snaps," a format that places AI agents in users’ chat conversations, allowing brands to reach audiences in a native, conversational setting. CEO Evan Spiegel told analysts the new format proves that chat can be monetized in a way that feels organic to Snapchat’s user experience.

Spiegel also used the earnings call to preview Snap’s upcoming augmented‑reality hardware, the consumer‑ready version of its Specs glasses. He suggested that as people shift away from traditional keyboards and screens, wearable devices and AI assistants will become central to daily computing. Snap plans to reveal more details about Specs at the Augmented World Expo in Long Beach, California, next month.

The collapse of the Perplexity partnership underscores the challenges of integrating third‑party AI services into established social platforms. While the deal promised a high‑profile AI search experience, practical hurdles and divergent product strategies ultimately proved insurmountable. Snap’s focus now rests on leveraging its own AI capabilities and hardware innovations to drive growth, rather than relying on external search technology.

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