Pinterest's Expenses Rose Faster Than Revenue But Monetization Efforts Are Well Underway

Like Snap SNAP whose shares plummeted over 17% last week after the messaging company gave poor guidance for its current quarter and reported a second consecutive quarter of declining YoY sales, Pinterest PINS shares also tanked about 4% as the social media company reported that expenses grew faster than its revenue. Meanwhile, the social media leader Meta Platforms Inc META saw its stock rise 7% upon reporting its latest quarterly results.

Pinterest’s Second Quarter Highlights

For the quarter that ended on June 30th, revenue jumped 6% YoY to $708 million, beating Refinitiv’s consensus estimate of $696 million, while net losses narrowed by 19% to $35 million, or 5 cents per share, with adjusted earnings amounting to 21 cents per share, while Refinitiv survey of analysts expected12 cents expected.Total costs and expenses rose 11% YoY to $781 million. Global monthly active users rose 8% YoY to 465 million.

Third Quarter Guidance

Pinterest management guided for YoY sales growth in high single digits while non-GAAP operating expenses are also expected to grow in low single digits on a YoY basis.

Meanwhile, Meta continues to rule the social media universe

While Snap continues to struggle, Facebook and Instagram parent Meta showed a rebounding online ad market with its quarterly results last week. Meta reported its revenue returned to double digit growth rate for the first time since 2021’s fourth quarter. Also, Meta provided a better-than-expected guidance. 

Pinterest’s Undergoing Monetization Efforts Are Well Underway

During the reported quarter, Pinterest revealed it signed a multi-year deal with the e-commerce king Amazon.com Inc AMZN to feature third-party ads. While reporting its quarterly performance, Pinterest management reported that the agreement with Amazon is progressing faster than anticipated. Under this partnership, once Pinterest users click on ad by Amazon, they will be directed to the Amazon marketplace to complete their purchase. While the partnership isn’t expected to result in significant revenue gains before the beginning of next year, Pinterest CEO Bill Ready did not hide how much he’s pleased about the early results from live traffic testing of Amazon ads as the company is betting heavily that Amazon will bring more shoppable content to the platform or in other words, that Amazon will help Pinterest finally solve the monetization equation.

AI Is Also A Big Part Of Its Strategy

Pinterest reported that AI has already been used to improve the user experience as the company launched a ‘shop-to-look’ feature that recommends products in the home décor and fashion categories, which reportedly contributed to increased user engagement. 

Ready emphasized that during the reported quarter, Pinterest continued to accelerate its pace of innovation as the company remains focused on developing its key differentiators, a strategy that is already showing results, with the company returning to adjusted EBITDA margin expansion.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.