Pinterest (PINS) stock sank Wednesday after the social media company’s third-quarter earnings missed expectations. User growth for the digital pinboard operator beat Wall Street’s forecasts, but revenue was only in-line with estimates.
San Francisco-based Pinterest reported adjusted earnings per share of 38 cents for its September-ended quarter. Analysts polled by FactSet were projecting EPS of 42 cents. Revenue increased 17% to $1.05 billion, in-line with expectations.
Monthly active users for Pinterest increased 12% year over year to 600 million, sharply ahead of estimates for 590.3 million.
“Our investments in AI and product innovation are paying off,” Chief Executive Bill Ready said in a news release. “We’ve become a leader in visual search and have effectively turned our platform into an AI-powered shopping assistant for 600 million consumers.”
For the current quarter, Pinterest guided for sales of $1.33 billion at the midpoint of its range, just below expectations of $1.34 billion.
Tariff Hit For Pinterest
Pinterest relies on digital advertising sales for nearly all of its revenue. It competes in that market against other social media players, including Facebook and Instagram parent company Meta Platforms (META).
On a call with analysts Tuesday, Ready acknowledged that tariffs are causing some advertisers to spend more cautiously.
“We grew 17% despite operating in an environment where some of our largest retailers in UCAN (U.S. and Canada) pulled back spend across the industry,” Ready said. “Not specific to us, but pulled back across the industry as they navigated tariff-related margin pressure. And we think that’s disproportionately impacting large retailers. But that is a segment that we have more exposure to than other platforms given our focus on shopping.”
The 9% year-over-year revenue growth for Pinterest in the U.S. and Canada is the lowest for the company since Q4 2023, Jefferies analyst James Heaney said in a note to clients.
Heaney stuck to a neutral hold call for Pinterest stock.
“We think investors remain on the sidelines until one of PINS’ growth initiatives materializes more meaningfully,” Heaney wrote.
Pinterest Stock: Focus On Shopping
Pinterest is angling to better compete against Facebook and Instagram for performance-based advertising, where advertisers pay based on outcomes such as buying something or downloading an app. A big part of that strategy is a partnership struck in 2023 with Amazon.com (AMZN) to display Amazon product ads on Pinterest feeds.
Pinterest last year struck a similar deal with Alphabet (GOOGL) to display ads purchased through Google in international markets. Pinterest’s user base is growing fastest outside the U.S. and Canada but it has struggled to monetize its international presence.
The company wants to power more shopping through the Pinterest feed, which for many users is filled with posts about shopping-related topics like home-design and fashion.
“We’ve transformed Pinterest from a platform of window shopping, where users often found that all the stores were closed, into an AI-powered, visual-first shopping assistant,” Ready said on Tuesday.
But the company’s guidance for Q4 came in at the low-end of the mid- to high-teens annual revenue growth that Pinterest first targeted during an investor day in late 2023.
“Following softer results and management commentary, we are less constructive on the platform’s ability to deliver upside to expectations,” Wedbush analyst Scott Devitt wrote to clients Tuesday.
Still, he reiterated an outperform, or buy, call following the report. Devitt said Pinterest’s “valuation remains attractive, in our view, for a digital ad platform with considerable monetization potential ahead.”
Pinterest Stock Dives
On the stock market today, Pinterest stock has crashed more than 21% to 25.97. The slide wiped out Pinterest stock’s remaking year-to-date gains. Pinterest is now down 9% year to date.
Shares also tumbled below Pinterest’s 200-day moving average.
Coming into the report, Pinterest stock had an IBD Composite Rating of 93 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
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