Pinterest raises forecasts as Advertising AI boosts results

(MarketScreener with Reuters) Pinterest reported strong quarterly results on Thursday, driven by its AI-powered advertising tools and growing demand from advertisers. The social network expects Q2 revenue to exceed Wall Street expectations, an announcement that sent its shares up 16% in after-hours trading.

Pinterest has reported Q1 revenue growth of 16% to $855m, exceeding analysts' forecasts of $846.6m. However, adjusted EPS fell slightly short of the 26-cent estimate, at 23 cents.

A winning position

The company is increasingly focusing on direct response advertising, which encourages users to take a specific action such as purchasing a product, downloading an app, or visiting a website, a strategy that continues to drive advertising budgets despite economic uncertainty.

In a context marked by the end of a customs exemption regime in the United States and growing trade tensions, some social media platforms have seen their revenues impacted. Pinterest acknowledges that it is not entirely immune to this environment, but says it is banking on the diversity of its growth drivers. "We have seen a decline in spending by Asian retailers in the US following the end of the de minimis exemption," said Chief Financial Officer Julia Donnelly. "However, we are seeing a geographic reallocation to Europe and other regions."

Pinterest is holding its own against its competitors. Meta (Facebook's parent company) and Reddit both exceeded expectations in Q1, while Snap declined to issue a forecast, citing economic uncertainty.

Two clear segments

Pinterest is notably focusing on advertising automation and AI tools such as "Performance+" to personalize campaigns and attract advertisers. The company is increasingly appealing to Generation Z, which is now its most dynamic user segment.

CEO Bill Ready also announced a new advertising partnership with Magnite, which will aggregate advertising demand from smaller players. Pinterest already has similar agreements with Alphabet (Google) and Amazon.

Monthly active users worldwide grew 10% to 570 million, exceeding the consensus of 564 million, according to data compiled by LSEG. "These results show that Pinterest is able to maintain its momentum even without the seasonal effect of the holidays," commented Jeremy Goldman, senior director at eMarketer. The company anticipates revenue of between $960m and $980m in Q2, above the median forecast of $966.3m.