Snap swung to a profit in the third quarter, reporting net income of $56 million versus a $104 million loss a year earlier, as advertisers embraced new AI-driven ad tools and a buzzy partnership with Perplexity AI helped juice user engagement.
Revenue rose 14% year over year to $1.72 billion, landing near the top of the $1.7 billion to $1.74 billion range Snap had guided to in August, according to the company's third-quarter results. Adjusted EBITDA more than doubled to $383 million from $182 million, and free cash flow climbed to $164 million from $93 million, evidence that chief executive Evan Spiegel's multiyear push to control costs and lean on automation is translating into real profitability rather than one-off savings.
Much of the enthusiasm around the quarter centered on Snap's deal with Perplexity AI, which brought the AI search engine's answer tools into Snapchat and sent the stock surging in the days after it was announced over the summer. Snap also pointed to gains from its in-house advertising systems, which use machine learning to better match ads with users, as a driver of the swing to profitability. The company highlighted the rollout of its Specs augmented-reality glasses as another pillar of its pitch to investors that Snapchat's business extends well beyond its core messaging app.
The results arrive at a moment when social platforms are under pressure to show that heavy AI investment is paying off in revenue, not just user numbers. Snap's own daily active user growth has been comparatively modest next to larger rivals, making profitability and ad-technology gains the more persuasive story for a company still working to convince Wall Street it can compete with Meta and TikTok for advertising dollars. Snap's shares, which had lagged the broader social-media sector for much of the year, got a lift from Wednesday's numbers as investors weighed whether the AI-ad push can be sustained into the holiday quarter, typically the company's strongest of the year.
Snap's turnaround effort has been underway since 2023, when the company began a sustained push to cut costs, slow hiring and reorganize its advertising business after several quarters of disappointing growth. Wednesday's figures mark one of its clearest proof points yet: both net income and free cash flow turned positive in the same quarter, something Snap had struggled to deliver consistently even as revenue grew. Analysts will be watching the fourth quarter closely, since it typically carries the bulk of Snap's advertising revenue and will show whether the Perplexity partnership and AI ad tools can sustain momentum once the holiday spending season ends.
