Pinterest shares plummeted in extended trading on Thursday following the company’s disappointing revenue report and a weaker-than-expected forecast. However, the stock managed to recover some losses after Pinterest unveiled a new partnership with Google. In its fourth-quarter earnings report, Pinterest missed revenue expectations but exceeded earnings projections.
The company reported a revenue of $981 million, falling short of the expected $991 million, according to LSEG (formerly known as Refinitiv). Adjusted earnings per share stood at 53 cents, surpassing the estimated 51 cents per share. Despite a 12% increase in revenue from the previous year, with net income reaching $201 million or 29 cents per share, up from $17.49 million or 3 cents per share, Pinterest’s performance failed to meet market expectations.
Monthly active users in the fourth quarter rose by 11% to 498 million, surpassing analyst estimates of 487 million. However, the global average revenue per user fell slightly short at $2, compared to the estimated $2.05. Pinterest’s first-quarter revenue forecast ranged between $690 million and $705 million, indicating year-over-year growth of 15% to 17%. However, the midpoint of $697.5 million fell below the average analyst estimate of $703 million.
Initially plummeting by as much as 28% in after-hours trading to hit a low of $29.40, Pinterest’s shares rebounded to $37.82 after CEO Bill Ready announced a “third-party app integration with Google” during an analyst call. Ready compared the Google integration to Pinterest’s partnership with Amazon, focusing on third-party ads. He emphasized the potential of this partnership to enhance international monetization, particularly outside the U.S., where 80% of Pinterest users reside but only 20% of sales occur.
Despite the broader recovery in the digital advertising market, with Meta, Alphabet, and Amazon experiencing double-digit growth in ad businesses, not all companies are reaping the benefits. Snap shares plummeted by 35% after reporting fourth-quarter sales growth of 5% and issuing weak guidance. Ready remains optimistic about Pinterest’s prospects, citing improvements in the digital ad market and the company’s strong performance in retail advertising.
In the face of challenges like the Middle East crisis affecting advertiser spending, Pinterest maintains its focus on improving advertiser performance. Before the earnings report, Pinterest shares had witnessed a 9.5% increase year-to-date, building on a notable 53% surge in 2023. Cost reductions, including a 10% drop in expenses from the previous year, have bolstered Pinterest’s financial resilience, with reduced sales and marketing expenses resulting from a strategic downsizing initiative.