Shares in Snap soared 16% in after-hours trading as the social-media company announced a deal to integrate Perplexity's AI-powered answer engine directly into Snapchat.

Starting in early 2026, Perplexity will appear in the popular Chat interface for Snapchat's nearly one billion monthly active users. The AI company will pay Snap $400 million over a year in a deal that includes cash and equity. That's about 7% of the social-media company's 2024 sales.

"Millions of people connect and discover the world through Snapchat. By bringing Perplexity to Snapchat, we're able to serve that curiosity directly where it occurs," said Aravind Srinivas, chief executive of Perplexity.

The market's reaction to the deal offered another window into how investors view the efforts of established companies that partner with AI startups or take steps to integrate or distribute their services.

OpenAI has announced a series of deals in recent months that prompted a massive surge in the share prices of deal partners including Oracle and Advanced Micro Devices. Integrating Perplexity into Snapchat offers another suggestion that investors will continue to reward partnerships that contribute immediately to the bottom line.

For years, Snapchat has been among the most popular social-media platforms, especially with younger users, but the company has occasionally faced challenges in its efforts to transform those users into steady profits, especially compared with rival Meta Platforms.

Snap suggested that the company sees itself as a potential partner for other AI companies, to whom it can offer "a privacy-safe way to reach hundreds of millions of people who already communicate through chat every day," the company said in its announcement.

"We look forward to collaborating with more innovative partners in the future," Chief Executive Evan Spiegel said.

The company also said its loss narrowed in the third quarter compared with the year-ago period due to improved advertising demand from small- and medium-size businesses. Sales rose 10%, to $1.51 billion, largely in line with Wall Street expectations.