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01/11 03:11
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong revenue growth and optimistic guidance, including a 15-17% growth projection for Q3 2025. The emphasis on AI-driven ad optimization and partnerships like Magnite suggests further growth potential. While there are some uncertainties, such as tariffs and infrastructure diversification, the overall sentiment is positive, with significant investment in AI and international growth. The positive outlook is further reinforced by the company's focus on cost efficiency and margin expansion.
Revenue Q3 revenue grew 17% year-over-year to $1.049 billion. The growth was driven by strength in conversion and awareness objectives, particularly in retail, telecom, and entertainment sectors. There was also normalization within CPG, driven by the food and beverage subvertical.
Monthly Active Users (MAUs) Global MAUs reached 600 million, growing 12% year-over-year. U.S. and Canada MAUs grew 4% to 103 million, Europe MAUs grew 8% to 150 million, and Rest of World MAUs grew 16% to 347 million. Growth was attributed to strong user engagement and appeal across all regions.
Ad Impressions and Pricing Ad impressions grew 54% year-over-year, while ad pricing declined 24%. The decline in ad pricing was primarily due to a mix shift towards previously unmonetized or undermonetized international markets, which carry lower ad pricing.
Adjusted EBITDA Adjusted EBITDA was $306 million, representing a margin of 29%, up 170 basis points year-over-year. This was driven by revenue growth and disciplined cost management.
Free Cash Flow Free cash flow was $318 million, with over 90% of adjusted EBITDA converting to free cash flow over the trailing 12 months. This highlights the cash-generative nature of the business.
Cost of Revenue Cost of revenue was $206 million, up 13% year-over-year, driven by increased infrastructure spend related to user and engagement growth.
Operating Expenses Non-GAAP operating expenses were $543 million, up 15% year-over-year. The increase was due to investments in sales and marketing, R&D, and headcount to support AI and product initiatives.
International Revenue Revenue from Europe was $193 million, growing 41% year-over-year, and Rest of World revenue was $70 million, growing 66% year-over-year. Growth was driven by the adoption of shopping ad formats and the export of lower funnel playbooks.
AI-powered visual-first shopping assistant: Pinterest has transformed into an AI-powered visual-first shopping assistant, enhancing user shopping experiences.
Multimodal search experience: Launched a multimodal search experience for women's fashion, combining image and text inputs for precise searches.
Pinterest Assistant: Introduced a voice-activated conversational assistant to enhance discovery and shopping journeys.
Boards Made for You: New feature providing curated collections of personalized content to drive engagement and shopping.
Holiday Edit: Launched curated gift guides across 17 categories for the holiday season.
International monetization: International markets represent 83% of users but only 25% of revenue, highlighting significant growth potential.
Shopping ads in international markets: Shopping ads now represent 30% of international revenue, up from 9% in 2023.
Regional strategies: Localized strategies in Europe and Rest of World regions to scale monetization.
Revenue growth: Q3 revenue grew 17% year-over-year to $1.049 billion.
User growth: Global monthly active users reached 600 million, a 12% increase year-over-year.
Ad impressions: Ad impressions grew 54% year-over-year, driven by international markets.
Pinterest Performance+: AI-powered ad suite driving higher conversion rates and increased advertiser spend.
AI integration: AI is central to Pinterest's strategy, enhancing user experiences and advertiser outcomes.
Focus on Gen Z: Gen Z, comprising over 50% of the user base, is a key demographic for growth.
Advertiser partnerships: Strengthened partnerships with advertisers through new ad formats and features like ROAS bidding.
Competitive Pressures: Pinterest operates in an evolving competitive environment, which could impact its ability to maintain its user base and attract advertisers. The company must continue to distinguish itself as a destination for users and advertisers.
Regulatory and Legal Risks: The company acknowledges risks and uncertainties in its forward-looking statements, which could cause actual results to differ materially. These include regulatory and legal challenges that may arise.
Economic Uncertainties: Moderating ad spend in the U.S. and Canada due to larger U.S. retailers navigating tariff-related margin pressures could impact revenue growth.
International Monetization Challenges: While international markets represent a significant growth opportunity, they are currently under-monetized, with only 25% of global revenue coming from 83% of global users. This imbalance poses a challenge to revenue growth.
Ad Pricing Pressure: Ad pricing declined 24% year-over-year, driven by a mix shift to lower-priced international markets, which could impact overall revenue growth.
Infrastructure Costs: Increased infrastructure spending related to user and engagement growth could pressure margins if not managed effectively.
AI and Product Development Costs: Investments in AI and product initiatives, while necessary for growth, represent a significant cost that could impact profitability if not carefully managed.
Dependence on Advertisers: The company’s financial performance is heavily reliant on its ability to attract and retain advertisers, particularly in international markets where it is underpenetrated.
Q4 2025 Revenue Guidance: Expected to be in the range of $1.313 billion to $1.338 billion, representing 14% to 16% growth year-over-year. Foreign exchange impact is anticipated to be approximately a 1-point tailwind based on current spot rates.
Q4 2025 Adjusted EBITDA Guidance: Expected to be in the range of $533 million to $558 million. Adjusted EBITDA margin expansion is expected in the second half of 2025, though at a lower level compared to the first half of the year.
Cost of Revenue and Operating Expense Outlook: Non-GAAP cost of revenue is expected to grow sequentially from Q3 2025 by high single-digits percent. Primary investment areas include headcount growth in R&D for AI and product initiatives, as well as global sales team expansion.
International Monetization Growth: Significant opportunities to increase monetization in international markets over the next several years, with a focus on Europe and Rest of World regions. Shopping ads in international markets grew over 2x faster than overall revenue growth in these regions in Q3 2025.
AI and Product Innovation: Continued investment in AI to enhance user experience and advertiser performance. New features like Pinterest Assistant and multimodal search are being tested and expanded over the coming quarters.
Mid-Market and Smaller Advertiser Growth: Performance+ campaigns are driving higher adoption and spend among mid-market and smaller advertisers, representing approximately 15% of revenue today. Significant opportunity exists to increase share of wallet with this segment.
Share Repurchase Program: In Q3, Pinterest allocated $199 million towards share repurchases and $115 million toward net share settlement of equity awards. This was part of their ongoing efforts to mitigate dilution from employee stock-based compensation, resulting in a fully diluted share count that was roughly flat year-over-year.
The earnings call highlights strong revenue growth and optimistic guidance, including a 15-17% growth projection for Q3 2025. The emphasis on AI-driven ad optimization and partnerships like Magnite suggests further growth potential. While there are some uncertainties, such as tariffs and infrastructure diversification, the overall sentiment is positive, with significant investment in AI and international growth. The positive outlook is further reinforced by the company's focus on cost efficiency and margin expansion.
The earnings call summary indicates strong financial performance with revenue and EBITDA growth, positive user trends, and strategic AI investments. The Q&A section highlights constructive digital ad demand, successful international expansion, and a promising Instacart partnership. Despite management's vague response on ad revenue acceleration, the overall sentiment is positive, supported by optimistic guidance and AI-driven growth potential. The lack of a market cap suggests a neutral to positive stock reaction, but given the strong indicators, a 'Positive' rating is justified.
The earnings call reveals strong financial performance with 16% revenue growth and a 20% adjusted EBITDA margin. User engagement and MAUs are up 10%, supported by effective product enhancements. Despite a 22% decline in ad pricing, ad impressions increased by 49%, indicating healthy advertiser engagement. The company’s AI integration and strategic focus on Gen Z shopping and diverse verticals are positive indicators. Share repurchases and robust liquidity further bolster confidence. While some uncertainties exist, the overall sentiment is positive, suggesting a stock price increase of 2% to 8% over the next two weeks.
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