What happened

Shares of Pinterest (PINS -4.92%) are closing out July on a high note. The company reported results for the second quarter of 2020 showing a surge in monthly active users (MAUs), and investors are loving it. As of 11:30 a.m. EDT on Friday, the stock was up a whopping 31%.

Perhaps even more encouraging than its growth in MAUs is Pinterest's current revenue growth. In the first 29 days of July, revenue was up 50% from the same period in 2019.

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Image source: Getty Images.

So what

Global MAUs for Pinterest were up 39% from last year and now total 416 million. Not only was this an acceleration from the 30% global MAU growth it posted in the second quarter of 2019, it's an acceleration from the 26% growth it posted just last quarter. It appears that as people stay home more because of the COVID-19 pandemic, more are choosing Pinterest to pass the time. That's good.

However, Pinterest's revenue was up a mere 4% year over year. The company only managed to generate $272 million from its more than 400 million users, as its average revenue per user (ARPU) plummeted 21% to just $0.70. 

Pinterest's bottom line according to generally accepted accounting principles (GAAP) was greatly improved from last year. Yet the company still posted a net loss of $101 million. Furthermore, its adjusted net loss actually got worse: $38 million, compared to a $25 million loss last year.

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Image source: Getty Images.

Now what

On the surface, these numbers don't seem to correspond with Pinterest stock going up today. Who wants to buy a growth stock posting just 4% revenue growth and a widening loss? But I think investors are right to be excited about the company's results. 

Pinterest is complicated. First, its ARPU for U.S. users dropped 11% year over year to $2.50 as advertisers cut their budgets temporarily. Second, the company has barely started monetizing international users, and the international ARPU is a mere $0.14. But international users surged 49% from last year. 

Pinterest had a double whammy for the quarter. It took a revenue hit with its most profitable user base. And its least profitable user base grew substantially. But a growing user base is one of the most important parts to a long-term investing thesis for Pinterest. Therefore, it's 39% growth in MAUs is a good thing.

Furthermore, the drop in ARPU for Pinterest may be temporary. Revenue has improved every month since April, and July revenue is up 50%. This is partly due to advertisers resuming their spending. But this is also because other social media platforms are being boycotted, and Pinterest is viewed as a safer alternative.

Pinterest management expects third-quarter revenue to be up 30% year over year, reflecting a slowdown from July's growth. But its perception as a safe, positive social media platform is a good thing long term.