Pinterest Shares Tumble as Tariff Shocks and Weak Guidance Dampen Outlook
Pinterest’s stock experienced a significant downturn, closing down nearly 17% on Friday. The sharp decline followed the social media company’s disappointing fourth-quarter earnings report, which cited tariff-related disruptions as a primary concern.
The company reported fourth-quarter revenue of $1.32 billion, falling short of analysts’ expectations of $1.33 billion. Net income saw a substantial 85% drop to $277 million, a stark contrast to the $1.85 billion recorded in the previous year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBIDTA) also missed projections, coming in at $541.5 million against an expected $550 million.
Looking ahead, Pinterest provided cautious guidance for the first quarter, forecasting sales between $951 million and $971 million, which is below the consensus estimate of $980 million. CEO Bill Ready acknowledged an “exogenous shock this year related to tariffs,” and noted increased exposure to reduced advertising spend from major retailers.
In a strategic pivot, Pinterest announced in January plans to reduce its workforce by less than 15% and downsize its office footprint. This move signals a concentrated effort to double down on artificial intelligence (AI). The company stated it is “reallocating resources” to AI-focused teams and prioritizing the development of “AI-powered products and capabilities.” This strategic shift suggests a move towards leveraging AI to enhance user engagement and advertiser tools, potentially offsetting some of the current macro-economic pressures.
Analyst Reaction and Future Prospects
The market’s reaction was swift, with analysts expressing a mixed outlook. Citi downgraded Pinterest shares from “Buy” to “Neutral,” citing “more limited visibility from larger UCAN & EU advertisers due in part to tariffs and challenges across specific verticals,” such as home furnishings. Citi also pointed to the rebuilding of Pinterest’s go-to-market sales function and increased investments impacting margins as factors contributing to the downgrade.
Goldman Sachs analysts echoed concerns about near-term revenue performance being “pressured by macro-related headwinds,” including tariffs and consumer spending. However, they remained optimistic about Pinterest’s long-term growth strategy, which centers on diversifying its advertiser base, automation, and performance-oriented objectives.
A bright spot for Pinterest remains its user growth, particularly among Gen Z users. The company reported a record 619 million global monthly active users in the fourth quarter, a 12% year-over-year increase. This robust user engagement, especially within a key demographic, provides a solid foundation for future monetization strategies. The company’s focus on AI could unlock new avenues for personalized advertising and enhanced user experiences, potentially driving future revenue growth and improving advertiser ROI. The integration of AI could also lead to more sophisticated ad targeting and content recommendation engines, making the platform more attractive to a wider range of advertisers.
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