Sources: Snap–Perplexity $400M AI-search deal has fallen apart, and Snap plans big layoffs Wednesday

It has been reported that a proposed AI search partnership between Snap and Perplexity — a deal that allegedly would have seen Perplexity pay Snap roughly $400 million — has collapsed. It has also been reported that Snap will announce significant, sweeping layoffs on Wednesday, moves sources say are meant to more sharply separate the legacy Snapchat business from CEO Evan Spiegel’s high-stakes bet on AR glasses, known as Specs. Big promises. Bigger pinch points. A crucible moment, some would say.

What fell apart

According to reporting by Alex Heath and sources close to the matter, negotiations that once looked like a tidy cash-and-capability win have unraveled. Details remain thin and unverified; it has been reported that the $400M figure was part of the commercial terms under discussion. Why? We don’t have a public post-mortem yet. Deals of this size and complexity die for all kinds of reasons — shifting strategy, valuation fights, or simply a mismatch between what an early-stage AI company can promise and what a camera-and-ads giant needs.

Why it matters

If true, the timing is brutal. Specs are launching soon, and Spiegel’s pivot toward AR has always carried a “bet the farm” feel. Now Snap appears to be cutting payroll while doubling down on hardware. Who gets slimmed down — ad teams or R&D? Which side of the house will get the lifeline? Employees are bracing; investors will be watching. In an era where every consumer platform juggles AI, hardware, and ad monetization, Snap’s next moves could be a bellwether: pivot or perish?

Sources: sources.news