Shares fall as investors weigh growth concerns and tariff impact.
Pinterest (PINS) reported third-quarter earnings that fell short of Wall Street’s expectations, sending its shares tumbling after hours. Despite steady user growth and a strong push into AI-powered shopping, investor sentiment cooled amid cautious guidance and competitive pressures.
Key Points
- Q3 earnings missed expectations as profits lagged despite revenue growth.
- Guidance for the holiday quarter came in below analyst forecasts.
- Strong user growth contrasts with weaker monetization and tariff headwinds.
Pinterest’s Earnings Miss Sparks Investor Selloff
Pinterest’s latest quarterly report was a mixed bag. Revenue rose 17% year-over-year to $1.05 billion, meeting forecasts, but adjusted earnings per share came in at $0.38, missing the $0.42 consensus estimate. The stock plunged more than 20% after the announcement.
Monthly active users hit a milestone of 600 million, up 12% from last year and surpassing estimates. However, average revenue per user fell short at $1.78, largely due to faster international growth in lower-spending markets.
CEO Bill Ready highlighted the company’s evolution: “We’ve transformed Pinterest from a platform of window shopping into an AI-powered visual-first shopping assistant.” The company has invested heavily in AI and product innovation, hoping to make its platform a go-to shopping destination for consumers and advertisers alike.
Why Did Pinterest’s Guidance Disappoint Investors?
Pinterest forecast fourth-quarter revenue between $1.31 billion and $1.34 billion, slightly below Wall Street’s expectations. Management also noted that tariffs and cautious spending from large U.S. retailers would pressure North American ad sales — a critical source of revenue.
While adjusted EBITDA guidance was in line with estimates, investors were hoping for stronger signals heading into the holiday season. The muted outlook, coupled with competitive strength from Meta and Google, raised questions about Pinterest’s ability to capture advertising market share.
CFO Julia Brau Donnelly also warned that tariffs on home furnishings could dampen seasonal ad spending, a typically strong period for the company.
Can AI and Open-Source Models Boost Growth?
A key focus for Pinterest is using artificial intelligence to enhance user experience and reduce costs. The company’s new Pinterest Assistant offers personalized, visual-first shopping recommendations powered by open-source AI models.
According to CEO Ready, these models perform nearly as well as proprietary ones but at a fraction of the cost. “We’re seeing tremendous performance from open-source models for our visual AI use cases,” he said, adding that the shift could meaningfully improve long-term profitability.
Pinterest’s visual search technology already drives ad targeting, product discovery, and multimodal search experiences. However, competition in the digital ad space remains fierce, and success will depend on how well the platform converts its 600 million monthly users into higher-value shoppers.
What It Means for Investors
For retail investors looking to analyze stocks and identify companies that are good to invest in, Pinterest presents a mixed picture. On one hand, its valuation appears relatively inexpensive — trading at 16.6 times forward earnings compared to 23.1 times for the S&P 500. Analysts still rate the stock a “Buy,” with an average price target of $43.40, implying about 29% upside from recent levels.
On the other hand, the short-term outlook looks cloudy. Weak guidance, tariff impacts, and competitive pressure from Meta (META) and Google (GOOG) suggest volatility ahead. The stock has historically swung an average of 14% after earnings, so investors should expect continued ups and downs.
Long-term potential remains tied to Pinterest’s ability to grow its e-commerce footprint, expand monetization, and control costs through efficient AI deployment. For those focused on the basics of investing and searching for best company investments in the tech-advertising space, patience may be key.
Conclusion
Pinterest’s latest earnings report reflects both opportunity and risk. User growth and AI innovation show promise, but near-term challenges could weigh on performance. Investors who believe in the company’s AI-driven commerce strategy may view the pullback as a long-term entry point — but should brace for volatility as the advertising landscape continues to shift.
FAQs
What caused Pinterest’s stock to drop after earnings?
Pinterest’s stock fell because its Q3 earnings missed Wall Street estimates and fourth-quarter guidance came in below expectations.
How many users does Pinterest have now?
Pinterest reported 600 million monthly active users globally, up 12% from last year.
Why did Pinterest’s revenue growth slow in North America?
Tariffs and reduced ad spending from major U.S. retailers affected North American revenue, especially in categories like home furnishings.
Is Pinterest investing in artificial intelligence?
Yes. Pinterest is expanding its use of AI through tools like the Pinterest Assistant and open-source models that enhance visual search and reduce costs.
Is Pinterest stock a good investment?
Analysts rate Pinterest as a “Buy” with an average price target suggesting nearly 30% upside. However, investors should be prepared for short-term volatility.
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