Investors knew the second quarter of 2021 would be one to watch. Companies are going up against some unusual year-ago comparisons. This was particularly the case for Pinterest (PINS +3.47%). The visual search and media platform saw a surge in engagement in the year-ago period as people sheltered at home and looked for ways to stay entertained. On the other hand, however, the company's ad business suffered as advertisers reduced ad spend or even paused ad campaigns.
Pinterest's second-quarter 2021 results definitely proved to be interesting, highlighted by staggering revenue growth and user engagement headwinds simultaneously.
Here's a closer look at the tech company's second quarter.
Image source: Pinterest.
Soaring revenue
Pinterest's second-quarter revenue skyrocketed 125% year over year to $613 million. This crushed analysts' average forecast for revenue of $562 million and management's guidance for approximately 105% growth.
"We saw increased demand from large retail advertisers, as well as rapid growth in our international business," the company said in its second-quarter shareholder letter.
Helping the company's growth rate was an easy year-ago comparison, when revenue grew just 4% year over year as marketers pulled back ad spend.
This strong top-line growth fell down to the company's bottom line. Net income swung from a $101 million loss in the year-ago period to a $69 million profit. On a non-GAAP (adjusted) basis, net income was $170 million, up from a $38 million loss in the second quarter of 2020.
User growth challenges
But user engagement didn't fare as well. After posting impressive global monthly active user growth of 30% in the first quarter of 2021, this growth rate slowed to just 9% in Q2. Furthermore, monthly active users in the U.S. actually declined 5% year over year in Q2. Even more, engagement headwinds have persisted into July, with July monthly active users declining about 7% year over year and global monthly active user growth slowing to just 5%.
Since mid-March, Pinterest explained in its shareholder letter, the tech company's user engagement has been negatively affected by people "spending more time socializing with friends outside their homes, eating in restaurants, and generally participating in activities that are not our core use cases."
While the degree of Pinterest's user growth headwinds may come as a surprise to some investors, a glass-half-full view provides an alternative perspective. To trend with 5% global year-over-year growth in monthly active users going into the third quarter is quite impressive considering the comp Pinterest is up against. Global monthly active users soared 37% year over year in Q3 2020.
Investors should think carefully before they take any action because of one quarter's results. If you zoom out and look at the company's user growth over the last two years, Pinterest's growth story appears intact. Triple-digit revenue growth that crushed analyst expectations in Q2 isn't so bad either.
