AI search startup Perplexity AI is finalizing a $500 million funding round, reportedly led by venture capital firm Accel. This investment would elevate Perplexity to a $14 billion valuation, a significant increase from its $9 billion in December 2024.
This capital infusion signals strong investor belief in Perplexity’s “answer engine” as a challenger to search incumbents like Google and Microsoft-backed OpenAI. The company plans to use the funds to scale operations and further develop its product suite. This latest valuation, however, is below the $18 billion target discussed in March/April.
Fueling an Ambitious AI Challenger
Perplexity’s valuation has surged dramatically. It marks a 27-fold increase in under 18 months from $520 million in early 2024.The San Francisco-based company, employing around 100 people, now aims to leverage this momentum. Its annual recurring revenue (ARR) approached $100 million in early 2025. Some sources indicate $80 million ARR by January 2025, a 60% rise from October 2024, according to Tech Funding News.
The company’s strategy involves diversifying its offerings beyond its core search function. CEO Aravind Srinivas previously described Perplexity’s evolution as a transition from a simple answer provider to a more deeply integrated assistant. This vision is evident in the January 2025 launch of its Sonar API, designed for enterprise use. Perplexity’s blog at the time emphasized that reliable, citation-backed answers are crucial for enterprise tools.
Consumer-facing products have also expanded. An AI assistant for Android debuted in January, followed by an iOS version in April. Looking ahead, Perplexity is preparing its AI-centric “Comet” web browser for a mid-May 2025 release.
While Srinivas envisions Comet handling complex tasks with AI agents, he cautioned a healthy skepticism in an interview with Business Today. The company also stepped into e-commerce in March, integrating a “Buy with Pro” feature through a partnership with Firmly.
Market Position and Expansion Efforts
Perplexity processes over 400 million search queries monthly. According to its own data, it held a 6.2% share of the AI search market as of early 2025. The company had more than 15 million monthly users by April and this growth is attracting attention from major players.
Apple is reportedly considering integrating AI search tools like Perplexity into Safari. Eddy Cue, Apple’s Senior Vice President of Services, noted during Google’s antitrust trial that searches from Google within Safari fell for the first time in April 2025, attributing this to rising AI search popularity.
Distribution partnerships are key to Perplexity’s growth. A deal with Motorola, announced in April, will see Perplexity’s assistant pre-installed on new Razr phones.
However, Perplexity CBO Dmitry Shevelenko testified in the Google trial that Google’s contracts with Motorola prevent Perplexity from being the default assistant or having initial home screen placement. CEO Srinivas described the Motorola deal to CNBC as primarily a user acquisition play, noting they are not focused on revenue from device sales but are instead “looking for usage.”
This aggressive expansion, including four funding rounds totaling over $900 million in the year prior to May, has led to speculation. Tech Funding News suggests Perplexity might eye an IPO by 2026 or 2027. The company could potentially exceed a $250 million ARR threshold by late 2026.
Navigating Scrutiny and Industry Challenges
Despite its rapid ascent and backing from investors like Nvidia and Jeff Bezos, Perplexity faces notable challenges. A recent security audit by Appknox labeled Perplexity’s Android app “unsafe.” The report cited critical vulnerabilities, including hardcoded API keys and missing SSL pinning. Appknox CEO Subho Halder warned, their testing showed “critical vulnerabilities in Perplexity AI that expose users to a variety of risks… It’s crucial for the developers to address these issues swiftly.”
These security concerns arise as Perplexity pushes for wider device integration. The company has also faced legal scrutiny from publishers such as The New York Times and Dow Jones.
The publishers allege unauthorized use of content for its AI summaries. Previous reports also accused Perplexity of aggressive web scraping and disregarding publisher protocols. Perplexity has however refuted these allegations.
The company’s ambitious public moves, like its March proposal to acquire TikTok’s U.S. operations, further highlight its bold, if sometimes controversial, approach to disrupting the tech landscape with its AI search approach.
