Pinterest Shares Plunge 20% After Earnings Miss and Disappointing Guidance

Shares of Pinterest (PINS) took a significant hit Tuesday, plummeting nearly 20% in extended trading after the social media company’s third-quarter earnings report revealed a miss on earnings per share and a weaker-than-anticipated outlook for the crucial holiday season.

Here’s a breakdown of the results compared to LSEG analyst consensus estimates:

• Earnings per share: 38 cents adjusted vs. 42 cents expected
• Revenue: $1.05 billion vs. $1.05 billion expected

While Pinterest managed to grow its third-quarter sales by a healthy 17% year-over-year, hitting $1.05 billion, and net income soared to $92.11 million (a 201% increase from $30.56 million in the same period last year), the market reacted negatively to signs of slowing momentum. The company’s forecast for fourth-quarter revenue, expected to fall between $1.31 billion and $1.34 billion, further dampened investor enthusiasm. The midpoint of this guidance, $1.325 billion, fell short of Wall Street’s consensus estimate of $1.34 billion.

The after-hours stock decline wiped out Pinterest’s year-to-date gains, signaling a potential shift in investor sentiment following a period of relative optimism surrounding the company.

On a positive note, Pinterest reported 600 million global monthly active users (MAUs) for the third quarter, surpassing the StreetAccount projection of 590 million. This figure follows the 578 million MAUs reported for the second quarter. Strong user engagement remains a key asset for Pinterest as it seeks to monetize its platform more effectively.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third quarter reached $306 million, exceeding StreetAccount’s estimate of $295 million, indicating strong cost management. However, sales in the critical U.S. and Canada regions, which represent a significant portion of Pinterest’s revenue, totaled $786 million, falling short of StreetAccount’s $799 million estimate, raising concerns about regional performance. Similarly, Pinterest’s third-quarter global average revenue per user (ARPU) of $1.78 was slightly below the $1.79 projection.

“Our investments in AI and product innovation are paying off,” stated Pinterest CEO Bill Ready, highlighting the company’s efforts to leverage artificial intelligence. “We’ve become a leader in visual search and have effectively turned our platform into an AI-powered shopping assistant for 600 million consumers.” Ready’s assertion underscores Pinterest’s strategy to deepen user engagement through AI-driven features and enhance its position in the competitive visual search landscape.

However, Pinterest finance chief Julia Donnelly provided more nuanced insights during the earnings call, revealing “pockets of moderating ad spend” in the U.S. and Canada regions during the third quarter. Donnelly attributed this slowdown to unspecified “larger U.S. retailers” grappling with margin pressures exacerbated by tariff-related issues.

The company anticipated these headwinds persisting into the fourth quarter, with Donnelly stating that “we see these broader trends and market uncertainty continuing with the addition of a new tariff in Q4 impacting the home furnishing category.” This statement points to the potential impact of broader economic and geopolitical factors on Pinterest’s ad revenue.

The reference to tariffs alludes to policies impacting specific sectors. These tariffs, particularly on imported timber, lumber, kitchen cabinets, and related furniture, are contributing to a climate of uncertainty and impacting retailers’ bottom lines, ultimately influencing their advertising spend. The impact on the home furnishings category suggests a targeted effect on one of the key areas where Pinterest users often seek inspiration and products.

The earnings report comes amid reports from tech giants like Meta, Alphabet, and Amazon showing robust digital advertising sales fueled by heavy investments in artificial intelligence infrastructure. These companies reported strong revenue growth in their advertising divisions, signaling a competitive landscape where ad dollars are increasingly concentrated among a few dominant players.

Meta reported a 26% year-over-year increase in revenue, reaching $51.24 billion, with online ads accounting for 98% of its revenue. Amazon’s online ad unit saw a 24% year-over-year surge in sales, amounting to $17.7 billion. Alphabet reported total advertising sales of $74.18 billion for the third quarter, nearly a 13% increase from the previous year.

Other players in the social media space, like Reddit, are also experiencing advertising growth. Reddit’s third-quarter earnings revealed a 68% year-over-year increase in sales, reaching $585 million, demonstrating the potential for growth in niche platforms.

Snap is set to release its quarterly earnings on Wednesday, and these result will provide more context of the trends going on with social media companies.