Pinterest (PINS 0.72%) shares were soaring after the image discovery engine reported second-quarter earnings Monday night. The stock closed the after-hours session up 21.4%, even though the results weren't particularly impressive. Revenue grew just 9% to $665.9 million, which was short of estimates at $667 million and the company's own guidance for 11% top-line growth.

Pinterest battled the same macroeconomic headwinds as the broader digital advertising industry, with nearly every competitor posting much slower revenue growth than a year ago because of difficult comparisons, a hangover from heady growth during the pandemic, and a slowdown in ad spending driven by recession fears.

On the bottom line, increased spending ate into profits, and the company finished the quarter with adjusted earnings per share of $0.11, down from $0.25 in the quarter a year ago, and below the analyst consensus at $0.18.  Guidance was also underwhelming as management called for revenue growth of just mid-single digits in the third quarter, also below expectations of 13% top-line growth.

The reason Pinterest stock jumped in spite of the uninspiring numbers is probably that its user base has stabilized, holding at 433 million monthly active users (MAUs) after several quarters of year-over-year declines. It also helps that the stock looked cheap coming into the report, down more than 75% from its peak last year, and a statement issued by activist investor Elliott Investment Management shortly after the earnings report came out attracted attention. Elliott called Pinterest a "highly strategic business with significant potential for growth" and said its conviction in the opportunity and leadership had led it to become the largest investor in the stock. Pinterest stock popped on initial reports of Elliott's stake a couple of weeks ago, so it's not surprising that its first public confirmation of its stake would give the stock a boost. 

However, there's one under-the-radar number that also explains why the Pinterest jump is deserved. 

Advertisers still love it

There are two metrics that determine revenue for social media companies: the total user base and the average revenue per user (ARPU). To get total revenue, you simply multiply those two numbers together, which means that social media companies have only a few ways of growing revenue. They can add more users, coax users into spending more time on the site, or make more money from the user base. This is done via increasing the number of ads users see, which has its limits, or increasing return on ad spend, which is what advertisers want and will pay up for.

In a difficult macroeconomic environment in Q2, Pinterest did something that none of its social media peers could do, including Facebook parent Meta Platforms (META 3.18%), Snapchat owner Snap (SNAP 5.28%), and Twitter (TWTR). It increased ARPU, and it did so in every region.

Globally, Pinterest's ARPU rose 17% to $1.54. Management credited advertiser demand and success from shopping-related ad products for the solid growth in ARPU. The key metric increased 20% in North America to $5.82; it was up 20% in Europe to $0.86, and in the rest of the world, where it has just started rolling out advertising, ARPU jumped 80% to $0.10.

By contrast, Meta Platforms' ARPU across its family of apps (Facebook, Instagram, WhatsApp, and Messenger) fell 5% to $7.91, and ARPU on Facebook globally was down 3% to $9.82. Snap reported a similar decline, while Twitter's ARPU was down by double digits.

Pinterest is growing ARPU in part because of its push into shopping ads and its efforts to improve measurement tools for advertisers' return on investment. The growth in ARPU also seems to indicate that Pinterest has a competitive advantage over its peers that enables it to add value for its advertisers even while most brands are cutting back on spending.

What it means for Pinterest stock

Pinterest is unique in the social media space because users often come to the platform with the intent to purchase, meaning they often want to see ads. Unlike its peers, Pinners don't come to the platform to connect with other users, but to focus on themselves, as the company has said. Use cases for Pinners -- what the company calls its users -- could include looking for new exercise routines, exploring home improvement projects, or finding new children's activities. Many of those search categories represent ripe opportunities for advertisers. 

Pinterest still trails Facebook by a wide margin in ARPU, which may seem like a weakness, but that's representative of Pinterest being younger than Meta and a sign that it still has a long way to go to monetize its platform.

As it harnesses its power as an e-commerce platform, ARPU should continue to go up. The more immediate challenge for the company seems to be growing its user base, but there's good news there. MAUs are up slightly from 431 million in Q4 2021 at 433 million as of Q2, showing they've probably bottomed out after declining for several quarters.

If Pinterest can attract new users and continue to unlock value for advertisers, the stock looks like a winner at its current valuation.