If Pinterest is a bellwether of consumer spending, things are not looking up just yet. Still, investors in the social network rallied as Q2 revenue came in roughly in line with expectations and user declines were not as horrible as they thought. That's not to say Pinterest's earnings were good. Pinterest missed on earnings and delivered zero user growth in its most recent quarter, citing a combination of factors including the lingering impacts from the pandemic, reduced traffic from search engines, the rise of TikTok, and — like many companies reliant on digital advertising — the broader macroeconomic uncertainty which has pulled down other tech stocks including Meta, Twitter and Snap.
Meta last week delivered its first quarterly revenue decline, while Snap missed and declined to forecast its future performance. Twitter, amid a contested acquisition by Elon Musk, has also been fending off an advertiser exit due to the uncertainty over the Musk sale.
Pinterest, meanwhile, posted its own fairly disappointing Q2 results with revenue up 9% year-over-year, reaching $665.9 million, which was below Wall Street estimates of $667 million. Or, as The Wall St. Journal put it, it was the lowest revenue growth in two years. The company also posted a new loss of $43.1 million and earnings of 11 cents adjusted per share, versus the 18 cents expected. More worryingly, it informed investors its third quarter revenue growth would be in the “mid-single digits,” when analysts were predicting 12.7% revenue growth.
Users numbers stayed flat at 433 million monthly actives — the same number it reported in the prior quarter, and down 5% year-over-year. However, this was one of the few bright spots amid otherwise troubling news as analysts had been forecasting a bigger drop to 431 million users.
The stock popped on the news that the loss wasn't as bad as expected, and because revenue was close to expectations. In after hours trading, the stock was up over 20%, as Pinterest additionally benefited from praise by investor Elliott Management, which recently took a more than 9% stake in the company. (Pinterest confirmed the investment on the earnings call.)
In its letter to shareholders, Pinterest admitted there was “work to be done to grow” users, particularly in its mature markets in the U.S., Canada and Europe.
This was also the first quarterly earnings under new Pinterest CEO Bill Ready, who joined the social image sharing service after leading payments and commerce at Google previously, and before that, serving as COO at PayPal.
Ready spoke to his plans for Pinterest's future with a sense of both optimism and urgency, calling it a “very unique platform” but one the must be made more attractive to advertisers and content creators alike. His letter suggested, too, the threat from short-form video, like TikTok, which was listed among the competition factors as a headwind.
“It is…clear that the market is evolving rapidly and we must do the same,” wrote Ready.
The company is in a time of transition, not only because of TikTok, but because TikTok represents a broader market shift to video as a lead-in to e-commerce transactions, while Pinterest's roots were in being an image bookmarking site. Traditional social networks are also giving way to “recommendation media” where creator-filled feeds are driven by algorithms, not posts from friends.
Pinterest has been attempting to navigate this change by courting creators and offering new video creation tools. The company said it expects its operating expenses to grow in the low double digits quarter-over-quarter in Q3 due to a new global brand marketing campaign it intends to launch in mid-September and run through late October. The company said it will continue investments in native content and creator efforts, as well.
More to come…