This Social Media Stock Just Beat Expectations in a Tough Quarter. Is Now the Right Time to Buy?

Pinterest (PINS 0.77%) stock surged 12.39% on May 12, a few days after the company delivered a surprisingly strong Q1 earnings report.

The numbers were hard to ignore. Revenue topped estimates. User growth increased to an all-time high. Margins moved in the right direction. And Pinterest pulled this off in what's typically the slowest stretch of the year for digital advertising.

Still, it's hardly a liftoff. The stock's up on the year, but it's well below its pandemic-era peak. Even after a stronger Q1, Pinterest is trading more than 20% below where it was this time last year.

It looks underpriced, but is Pinterest a buy? Let's pin down the details and see.

Strong quarter in a weak season

First quarters tend to be sleepy for ad-driven businesses. Post-holiday lull. Budget resets. Not much to see. But Pinterest bucked the trend.

Image source: Getty Images.

Revenue rose 16% year over year to $855 million. Monthly active users (MAUs) across the globe climbed to a record high of 570 million, a 10% increase. While it missed slightly on earnings per share (EPS), costs grew more slowly than revenue. Most notably, Pinterest turned a profit, posting $9 million in generally accepted accounting principles (GAAP) net income after a loss in the same quarter last year.

In short; Pinterest didn't just grow. It got more efficient. And it's turning that scale into profit.

Monetizing the globe

Pinterest's improving finances owe much to its global business kicking into gear. In fact, the standout in Q1 wasn't the U.S. or Europe, but its "Rest of World" segment, the fastest-growing yet most undermonetized part of its business.

Let's look at the spread.

Data source: Pinterest Q1 2025 earnings report.

Monthly average users (MAUs) in "Rest of World" climbed 14% to 320 million, and average revenue per user (ARPU) jumped 29%. That pushed revenue in the segment up 49%, far outpacing other regions. It's still just 5.3% of Pinterest's revenue, but the trajectory is steep.

If Pinterest can close even part of the monetization gap abroad, this region could become a major driver of future growth. To put it in perspective: If "Rest of World" reached just half of Europe's ARPU, it would have brought in $13 million more than Europe this quarter. At $2.08, it would have eclipsed revenue from the U.S. and Canada.

Building a better AI-powered ad machine

Pinterest's ARPU surge last quarter didn't happen by accident. It's the result of a platform designed around user intent -- and an ad system getting smarter about how to monetize it.

CEO Bill Ready emphasized this on the Q1 earnings call by calling Pinterest a "shopping destination." Not because users come looking for something to buy, but because they come looking for ideas. This makes Pinterest a goldmine for advertisers because user intent is baked into the platform.

Performance+ -- Pinterest's new AI-powered ad suite -- is built to monetize that intent. It's turning user behavior into better results, beating traditional campaigns in 80% of A/B tests. In other words, advertisers are getting more conversions with less friction, making it a powerful tool for unlocking under-monetized users.

Adoption is still early, but in Q1, shopping ad revenue in Europe and "Rest of World" grew more than three times faster than overall regional revenue. For a platform with hundreds of millions of under-monetized users, that's not just encouraging -- it's a glimpse at how scalable monetization, powered by AI, could accelerate Pinterest's growth trajectory.

Looks like growth, priced like value

With a trailing P/E around 12, Pinterest is trading at a discount to most of its social media peers (Meta's P/E is about 25). And that's despite record engagement, improving margins, and a growing pool of monetizable users. More importantly, the company is trimming costs and turning a profit. It's leaner, more focused, and has plenty of room left to run.

Pinterest has plenty of momentum, but real risks remain. Privacy regulation is tightening, especially in Europe where new data rules may limit the effectiveness of ad targeting. Advertising budgets may also shrink if economic conditions soften or interest rates stay high. And while Performance+ is promising, it's still new and hasn't been fully tested. None of this derails Pinterest's strong first quarter, but it does mean the company has to execute cleanly to stay on this trajectory.

While it's not without risk, Pinterest's growth story is compelling. With a growing user base, improving monetization, and a valuation that leaves room to rerate, it looks like a long-term winner in the making. For investors with a multi-year view, Pinterest is worth buying today.