Shares of image-browsing platform Pinterest (PINS 4.04%) jumped higher on Halloween, after the company reported surprisingly good financial results for the third quarter of 2023. As of 9:45 a.m. ET, Pinterest stock was up 13%.
User and monetization growth
For a long time, Pinterest had struggled to attract new users and to better monetize its audience. The company showed progress last quarter and progress continued in Q3. For starters, it reached 482 million global active users during the quarter, which was an all-time high and a big jump from its 465 million users at the end of the second quarter.
In Q3, Pinterest generated revenue of $763 million, an 11% year-over-year jump. The company did have an operating loss of $5 million, but that was greatly improved from its operating loss of $69 million in the prior-year period. Moreover, thanks to interest it earned on its large cash position, Pinterest had positive net income of $6.7 million.
That's growth and profit. The market had plenty to be happy about with Pinterest stock today.
What's next for Pinterest?
Looking ahead to the fourth quarter, Pinterest expects to grow revenue between 11% and 13% from the fourth quarter of 2022. That's good growth. Moreover, the company expects certain non-GAAP (adjusted) expenses to go down, which should boost adjusted profitability even more.
There is one glaring area of concern for Pinterest: ad rates. The company grew Q3 revenue thanks to a 26% jump in ad impressions -- the number of times ads were shown. Considering it grew its user base by only 8%, this must mean Pinterest's users are seeing more ads than ever, and that might eventually become a turn-off.
By comparison, Pinterest's price per ad fell 12% in Q3. Therefore, the company is still feeling the negative effects of a soft ad market. It's worth watching this in coming quarters.
That said, if the price per ad starts coming back up, Pinterest's revenue could skyrocket faster than expected.
