Pinterest Shares Tumble as Tariffs and Retailer Ad Spend Woes Bite
Pinterest experienced a significant downturn in its stock value, plummeting as much as 20% in after-hours trading on Thursday. CEO Bill Ready cited “exogenous shocks” stemming from tariffs, which have directly impacted the company’s top retail advertisers, as a primary driver for the decline. The social media platform reported a miss on fourth-quarter earnings and issued weaker-than-expected guidance for the current fiscal period, overshadowing revenue figures that were largely in line with analyst expectations.
During the earnings call, Ready acknowledged that the company’s fourth-quarter revenue performance was unsatisfactory, falling short of its potential. While overall sales for the quarter saw a 14% year-over-year increase, net income experienced a substantial 85% drop to $277 million. This decline from the previous year’s $1.85 billion net income was attributed, in part, to a deferred tax benefit recognized in the prior period.
This marks the second consecutive quarter where Pinterest’s stock has seen a significant decline following its earnings reports. The financial chief, Julia Donnelly, elaborated on the impact of tariffs, explaining that they created a more pronounced headwind than anticipated, particularly affecting ad spending from major retailers in Europe. The broader retail landscape has been grappling with the repercussions of ongoing trade disputes, which have escalated shipping costs, forced price increases for consumers, and limited product availability. Consequently, many retailers have resorted to advertising budget cuts and workforce reductions to navigate these economic challenges.
Looking ahead, Pinterest projected first-quarter sales to range between $951 million and $971 million, a figure that falls short of the $980 million anticipated by analysts. Donnelly warned that these headwinds are expected to persist and potentially intensify in the first quarter, with specific mention of impacts in the U.K. and Europe. The company also reported adjusted earnings before interest, taxes, depreciation, and amortization (EBIDTA) of $541.5 million, missing the analyst consensus of $550 million.
Despite acknowledging the near-term pressure from large advertisers due to these economic factors, Ready expressed optimism about the long-term opportunities with this cohort. To mitigate its reliance on a few large retailers, Pinterest intends to strategically focus on attracting and serving small-to-medium-sized businesses and international advertisers. “Most importantly, we need to further broaden our revenue mix and accelerate the next phase of our sales and go-to-market transformation,” Ready stated, emphasizing a strategic pivot in its revenue generation.
This financial performance follows a significant restructuring initiative announced in January, which involved the layoff of less than 15% of its workforce and a reduction in office space. The move was designed to reallocate resources towards technical teams focused on developing AI-powered products and capabilities, reflecting a strategic investment in future growth areas. The company’s internal handling of these layoffs, including the termination of employees who developed a tool to quantify the impact, underscored a period of internal adjustment and leadership emphasis on operational efficiency and strategic alignment. Donnelly noted that this restructuring and ongoing sales unit overhaul might introduce some short-term disruption, which has been factored into the company’s prudent guidance.
On a more positive note, Pinterest reported a 12% year-over-year increase in global monthly active users, reaching an all-time high of 619 million users in the fourth quarter, surpassing the 613 million expected by Wall Street. U.S. and Canada sales for the quarter also exceeded expectations, coming in at $979 million against StreetAccount’s estimate of $973 million. These user growth and regional sales figures provide a glimmer of resilience amidst the broader financial challenges.
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