Market Reacts Negatively Despite Robust Gen Z Engagement
Pinterest (PINS.N) reported a second-quarter profit that fell short of analyst expectations, overshadowing robust revenue and user growth, and triggering an 11% drop in after-hours trading. The social media platform posted an adjusted earnings per share (EPS) of 33 cents, below the consensus estimate of 35 cents, according to LSEG data.
Despite the earnings miss, Pinterest’s revenue rose 17% year-over-year to $998.2 million, surpassing analyst forecasts of $974.8 million. The company’s shares have rallied approximately 35% year-to-date, driven by expanding user engagement and innovative advertising solutions.
Key to Pinterest’s growth has been the rise in Gen Z users, who now make up over half of its global user base. The company’s AI-powered advertising suite, Performance+, has also gained popularity, especially among mid-market advertisers. CEO Bill Ready noted that more advertisers are adopting Performance+. This tool cuts campaign creation time by 50%, making it appealing for those focused on personalized and automated marketing.
Looking ahead, Pinterest expects third-quarter revenue between $1.03 billion and $1.05 billion, which matches market estimates of $1.03 billion. However, industry analysts note that while growth remains strong, it is not accelerating beyond the previous quarter’s 17% increase. “In a market with elevated expectations, even slight disappointments can provoke a sell-off,” commented Jeremy Goldman, analyst at eMarketer.
Pinterest’s performance contrasts with rivals Meta and Reddit, which recently posted strong second-quarter results, while Snap reported its slowest revenue growth in over a year. The discontinuation of the U.S. “de minimis” duty-free import exemption has contributed to tighter advertising budgets among smaller platforms like Snap, as marketers increasingly favor larger platforms with broader reach.
Pinterest CFO Julia Donnelly noted that regulatory changes have caused e-commerce retailers in Asia to cut in the United States as ad-spending investments, although some of them have rerouted these investments toward Europan and other international markets. This shift can be grasped in the 25% year-over-year decline in Pinterest ad prices, driven primarily by an ever-growing share of impressions originating from lower-priced international markets.
The platform continues to expand its advertising ecosystem through partnerships with Google, Amazon, and Magnite. Monthly active users (MAUs) climbed 11% year-over-year to 578 million, exceeding estimates of 553 million. However, user growth slowed in the quarter to 8 million new users from 17 million in Q1, signaling a maturing market.
“Pinterest’s user base is nearing a saturation point, and while AI enhancements help, overall market maturity is impacting growth momentum,” observed Lenny Zephirin, analyst at Zephirin Group.
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