Pinterest Profits Hit by Tariffs

Pinterest Inc. faced a significant downturn in its stock value after releasing its third-quarter earnings report. The company, renowned for its digital pinboard service, reported figures that did not meet investor expectations. Although user growth exceeded projections, the overall revenue aligned with analyst predictions.

Pinterest’s Earnings Overview

In the latest quarter ending September, Pinterest reported an adjusted earnings per share (EPS) of 38 cents. This fell short of the 42 cents expected by analysts, according to FactSet. Revenue rose by 17% to reach $1.05 billion, matching forecasted figures.

User Growth Outpaces Expectations

• Monthly active users increased by 12% year-over-year, totaling 600 million.
• This figure surpassed estimates of 590.3 million users.

CEO Bill Ready noted, “Our investments in AI and product innovation are paying off,” emphasizing Pinterest’s advancements in visual search and its transformation into an AI-driven shopping assistant for its large user base.

Sales Projections and Tariff Impacts

Looking ahead, Pinterest projected sales of $1.33 billion for the current quarter, slightly below the anticipated $1.34 billion. The company’s reliance on digital advertising revenue places it in competition with major players like Meta Platforms, the parent company of Facebook and Instagram.

Ready mentioned the caution among advertisers due to tariffs affecting spending practices. He stated, “We grew 17% despite operating in an environment where some of our largest retailers in U.S. and Canada pulled back spending.” This cautious approach is reportedly impacting larger retailers more significantly as they navigate tariff-induced margin pressures.

Growth in U.S. and Canada

• Year-over-year revenue growth in the U.S. and Canada reached only 9%, the lowest for Pinterest since Q4 2023.

Jefferies analyst James Heaney remarked that investor interest might remain subdued until Pinterest’s growth strategies yield more substantial results.

Strategies to Compete

Pinterest is focusing on enhancing performance-based advertising to better compete against Facebook and Instagram. A significant aspect of this strategy includes a partnership with Amazon to display its product ads on Pinterest feeds.

The platform aims to increase shopping engagement through its visual-first interface, capitalizing on its user base, which is expanding more quickly outside the U.S. and Canada.

Market Reactions and Future Outlook

The stock market reacted sharply, with Pinterest’s shares plummeting over 21% to $25.97, erasing year-to-date gains. The company’s stock performance now reflects a 9% decline for the year.

Pinterest’s performance metrics include an IBD Composite Rating of 93 out of a possible 99, indicating strong potential among growth stocks. Despite the revenue challenges and stock drop, analysts express cautious optimism about Pinterest’s valuation and its future in the digital advertising space.