Pinterest, Inc. (PINS) Q4 2025 Earnings Call Transcript

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Overview

The earnings call reveals mixed signals: strong revenue growth and international expansion are positive, but restructuring and sales transformation may cause short-term disruption. The Q&A highlights management's strategic focus on AI, SMB growth, and monetization, but also notes limited visibility and potential disruptions. The guidance is optimistic, but the lack of detailed timelines and potential headwinds balance the overall sentiment, resulting in a neutral outlook for the stock price.

Key Financial Performance

Global Monthly Active Users (MAUs) 619 million, up 12% year-over-year in Q4. Growth was driven by AI-led features for users and advertisers.

U.S. and Canada MAUs 105 million, up 4% year-over-year in Q4. Growth was consistent with overall user trends.

Europe MAUs 158 million, up 9% year-over-year in Q4. Growth was consistent with overall user trends.

Rest of World MAUs 356 million, up 16% year-over-year in Q4. Growth was consistent with overall user trends.

Global Revenue $1.319 billion, up 14% year-over-year in Q4. Growth was driven by retail, financial services, and telecom, despite tariff-related headwinds.

U.S. and Canada Revenue $979 million, up 9% year-over-year in Q4. Growth was driven by retail, financial services, and telecom.

Europe Revenue $245 million, up 25% year-over-year in Q4. Growth was driven by retail but impacted by cross-border spend reductions from large global retailers.

Rest of World Revenue $96 million, up 64% year-over-year in Q4. Growth was driven by increased ad impressions in under-monetized international markets.

Ad Impressions Grew 41% year-over-year in Q4. Growth was driven by increased engagement and international expansion.

Ad Pricing Declined 19% year-over-year in Q4. Decline was due to a mix shift towards under-monetized international markets.

Cost of Revenue $221 million, up 15% year-over-year in Q4. Increase was due to infrastructure investments related to user and engagement growth.

Non-GAAP Operating Expenses $562 million, up 13% year-over-year in Q4. Increase was driven by investments in sales, marketing, and AI-related R&D.

Adjusted EBITDA $542 million, with a margin of 41%, up 20 basis points year-over-year in Q4. Growth was driven by operating discipline and revenue growth.

Free Cash Flow $1.25 billion for the full year 2025, up 33% year-over-year. Growth reflects the asset-light nature of the business and strong profitability.

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Operating Highlights

AI-powered visual-first shopping assistant: Pinterest has transformed into an AI-powered visual-first shopping assistant and search destination, achieving 10 consecutive quarters of record high users.

Pinterest Assistant: Launched in beta in Q4, it is a voice-activated, visual-first conversational assistant leveraging AI to enhance multimodal discovery capabilities.

OmniSage AI model: Core AI model trained on Pinterest's taste graph, driving a 450 basis point lift in site-wide saves.

PinFM AI model: Proprietary foundation ranking model improving personalization and engagement, resulting in a 240 basis point increase in saves.

Global Monthly Active Users (MAUs): Achieved 619 million global MAUs in Q4 2025, a 12% year-over-year increase, with growth across all regions.

Gen Z user growth: Gen Z now represents over 50% of Pinterest users and is the fastest-growing cohort.

Revenue growth in Rest of World: Revenue grew 64% year-over-year in Q4 2025, driven by increased ad impressions in international markets.

AI-driven operational efficiencies: Approximately 50% of new code is AI-generated, improving internal efficiencies.

Cost optimization: Infrastructure cost optimization efforts have reached diminishing returns, but deliberate investments in AI and GPU capacity are ongoing.

Sales and go-to-market transformation: Focus on broadening revenue mix by targeting mid-market, SMB, and international advertisers to reduce reliance on large retailers.

Acquisition of tvScientific: Acquired a connected TV performance advertising platform to expand monetization opportunities beyond Pinterest's surfaces.

New leadership appointments: Hired Lee Brown as Chief Business Officer and Claudine Cheever as Chief Marketing Officer to enhance global monetization and marketing efforts.

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Risk or Challenges

Tariffs Impacting Ad Spend: Tariffs have disproportionately affected ad spend from top retail advertisers, leading to a decline in revenue from this segment.

Revenue Mix Concentration: The company has a high exposure to large retailers, which has resulted in vulnerability to their reduced ad spending due to economic pressures.

Sales and Go-to-Market Execution: The need for a more sophisticated sales and go-to-market strategy has been highlighted, as the current approach has not fully captured the monetization potential of user engagement.

International Market Monetization: Ad impressions in international markets are growing, but these markets remain under-monetized, impacting overall ad pricing.

Infrastructure and AI Investment Costs: Increased infrastructure spending, particularly for AI initiatives, is expected to create cost pressures, potentially impacting margins.

Regulatory and Safety Standards: Rising regulatory scrutiny and the need to maintain high safety standards, especially for young users, could increase compliance costs and operational complexity.

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Guidance & Outlook

Revenue Growth: Pinterest expects Q1 2026 revenue to be in the range of $951 million to $971 million, representing 11% to 14% growth year-over-year. Foreign exchange is expected to provide a 3-point tailwind in Q1.

Adjusted EBITDA: Q1 2026 adjusted EBITDA is expected to be in the range of $166 million to $186 million. Full-year 2026 adjusted EBITDA margin is projected to be roughly in line with 2025 at approximately 30%, with a potential 100 basis point drag due to the acquisition of tvScientific.

Cost of Revenue: Non-GAAP cost of revenue is expected to grow sequentially from Q4 2025 by low single digits percent in Q1 2026. Investments in GPU capacity for AI initiatives are anticipated to create modest headwinds in cost of revenue as a percentage of revenue in 2026.

AI Investments: Pinterest plans to invest in AI initiatives, including GPU capacity for training and serving visual foundation models and conversational models. These investments aim to enhance multimodal search, discovery, and the Pinterest Assistant.

Sales and Go-to-Market Transformation: The company is focusing on broadening its revenue mix by targeting mid-market enterprises and SMB advertisers. New leadership, including a Chief Business Officer and Chief Marketing Officer, will drive this transformation.

tvScientific Acquisition: The acquisition of tvScientific is expected to close in Q1 or Q2 2026, contributing less than 2 points of growth to Pinterest's Q4 2025 revenue. This acquisition will support monetization of off-platform supply and connected TV performance advertising.

Long-Term Margin Goals: Pinterest expects to achieve adjusted EBITDA margin targets of 30% to 34% over the medium term, despite short-term pressures from AI investments and the tvScientific acquisition.

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Shareholder Return Plan

Share Repurchase Program: In 2025, Pinterest allocated $500 million towards share repurchases in Q4, bringing the full year total to $927 million for a total of 30 million shares repurchased. Additionally, $399 million was utilized for net share settlement of equity awards. Combined, these actions resulted in an approximately 1.6% decline in year-over-year fully diluted share count, which compares favorably to the stated positive 2% to 3% average annual target.

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Key Q&A

Q:Can you talk more about the drivers of 4Q revenue, including the home impact that you saw, and how you're thinking about the 1Q guidance?

A:Julia Donnelly explained that larger retail advertisers created a significant headwind in Q4 by pulling back on ad spend to protect margins, which impacted Pinterest more due to its revenue mix. The home category, affected by a new furniture tariff, performed as expected. For Q1, these headwinds are expected to persist and may intensify, including in UCAN and Europe. A recent restructuring and sales transformation may cause near-term disruption, but these factors are accounted for in the guidance. Beyond Q1, visibility is limited, but no new headwinds are anticipated.

Q:Can you elaborate on how you and Lee are changing the go-to-market team and how this reorganization will drive wallet share in digital advertising for Pinterest?

A:William Ready stated that Lee has been taking decisive actions to restructure and reallocate resources to broaden revenue streams, focusing on mid-market enterprise, SMB advertisers, and international markets. The company has doubled the growth rate of its managed SMB business and expanded with mid-market enterprise advertisers. However, more growth is needed, and the sales team is being restructured to improve performance selling capabilities and measurement. These changes are expected to play out over a few quarters.

Q:Can you talk more about the tech investment needed to broaden and deepen the advertiser base and the dynamics around engagement trends versus ad revenue?

A:William Ready highlighted that Pinterest is under-indexed in the SMB market, which represents 15% of revenue but is growing rapidly. The company is focusing on improving its Performance Plus campaigns and simplifying advertiser onboarding. Julia Donnelly added that growth drivers include expanding with mid-market enterprises, international markets, agencies, and emerging verticals. On engagement, Pinterest has achieved record user growth and 80 billion monthly searches, with over half being commercial. However, the ad platform and sales capabilities need to catch up to user engagement levels.

Q:How does Pinterest fit into the increasingly competitive digital advertising landscape with the rise of automation, AI, and new players like ChatGPT?

A:William Ready emphasized that ad dollars will flow towards clicks and conversions, and Pinterest has a unique curation signal and a differentiated full-funnel platform. With 619 million global users and 80 billion monthly searches, Pinterest has a high commercial intent audience. The company is leveraging AI to improve performance and sees room for multiple winners in the market. Pinterest's visual-forward platform and unique data provide a competitive advantage.

Q:Can you walk through the adjusted EBITDA outlook for the year, considering top-line headwinds, sales force transition, and investment reallocation?

A:Julia Donnelly stated that adjusted EBITDA margins are expected to be roughly in line with 2025, excluding a 100 basis point drag from the tvScientific acquisition. Investments in GPU capacity for AI initiatives will impact cost of revenue by approximately 100 basis points. A January restructuring will generate $100 million in annualized OpEx savings, half of which will be reinvested in sales transformation and AI talent. The tvScientific acquisition will add a 100 basis point headwind to full-year adjusted EBITDA margin.

Q:What are the key changes you want to make in the go-to-market strategy for SMBs and international markets, and what disruption is expected in Q1?

A:William Ready explained that Pinterest is focusing on improving performance selling and measurement capabilities for SMBs and international markets. The company has made progress with its Pinterest Performance+ product, which doubled SMB growth in 2025. However, more bold steps are needed. Julia Donnelly added that the Q1 guidance accounts for some disruption due to restructuring and backfilling roles, which will take time to ramp up.

Q:What does agentic commerce mean for Pinterest, and what steps are being taken to achieve it?

A:William Ready described agentic commerce as using AI to help users along their commercial journey without requiring prompts. Pinterest's visual search and personalization meet users with relevant products, enabling seamless purchases. The company introduced Pinterest Assistant for voice interaction and is focusing on reducing friction in the shopping journey. Users remain in control of final purchase decisions, and the platform is seeing strong engagement and commercial intent.

Q:How does the tvScientific acquisition expand Pinterest's opportunities and budget pools?

A:William Ready explained that the tvScientific acquisition allows Pinterest to extend its high-intent audience to third-party supply, particularly in connected TV, one of the fastest-growing ad markets. This acquisition positions Pinterest as a full-funnel search, social, and connected TV performance solution, opening up larger budget pools and incremental opportunities.

Q:Review of Unclear Management Responses

A:Management avoided providing specific timelines or quantifiable metrics for when the sales transformation and go-to-market changes would yield measurable results. Additionally, while they acknowledged near-term disruptions, they did not provide detailed plans or contingencies to address these challenges.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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