Pinterest shares drop 7% after Q3 revenue guidance disappoints

Pinterest shares dropped 7% in after-hours trading on Tuesday following the company’s earnings report, which, despite surpassing expectations for revenue and earnings, included disappointing sales guidance for the upcoming quarter.

The platform reported an 18% rise in sales, totaling $998.2 million compared to the same quarter last year. However, the company also revealed a net loss of $47 million, or 8 cents per share, a sharp contrast to the net income of $38.76 million, or 6 cents per share, reported a year earlier. CEO Bill Ready emphasized the strength of Pinterest’s platform in the earnings release but acknowledged challenges ahead due to external factors affecting brand spending.

Looking forward, Pinterest estimates third-quarter revenue between $1.19 billion and $1.21 billion, aligning with analyst consensus at the midpoint of $1.2 billion. This guidance reflects expected headwinds from foreign exchange rates and a shift in advertising spending patterns. Finance Chief Julia Donnelly highlighted the impact of the World Cup concluding and Amazon's Prime Day moving to the second quarter, which has altered spending dynamics for brands. The company experienced a temporary boost in Q2 due to these events, but a corresponding decline is anticipated in Q3.

In terms of user engagement, Pinterest saw an 11% year-over-year increase in global monthly active users, now totaling 640 million, surpassing estimates. The average revenue per user was $1.86, exceeding projections. During the earnings call, Ready discussed Pinterest's approach to artificial intelligence, advocating for the use of open-source models to manage costs effectively. He stated that companies not investing in these models risk wasting shareholder money, as the landscape for AI continues to evolve, requiring strategic investment in both proprietary and open-source solutions.