Share prices of Pinterest (PINS 2.80%) sank last week after the visual pin-board operator's second-quarter earnings missed expectations. However, revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in above expectations, and guidance was strong.
Let's take a closer look at Pinterest's most recent results and prospects to see if the dip is a buying opportunity.
Accelerating growth
The transformation of Pinterest under CEO Bill Ready continued to bear fruit in the second quarter, with the company reporting solid revenue and user growth. Ready has invested heavily to make Pinterest's platform more attractive to both users and advertisers through the use of artificial intelligence (AI).
This includes developing proprietary multimodal large language models (LLMs) that can handle visual searches, improve its search recommendation algorithm, and better handle conversational search queries.
The company has also worked to make its platform more shoppable, and on this front, it announced a new partnership with Instacart. Pinterest will now have ads that are directly shoppable via Instacart. This will include items in the food and beverage category, as the company looks to attract more consumer packaged goods advertisers to its platform.
Pinterest once again saw solid average revenue per user (ARPU) and user growth in the quarter, especially in international markets. Monthly active users (MAUs) increased by 11% to 578 million, led by a 14% rise in "rest of world" users to 329 million. U.S. and Canada MAUs rose by 4% to 102 million, while European users grew by 7% to 146 million.
Its overall ARPU climbed by 6% year over year to $1.74. However, due to the big regional difference, it's best to look at the metric on a regional basis. ARPU rose by 6% to $7.29 in the U.S. and Canada, while European ARPU surged by 26% to $1.30. "Rest of world" ARPU soared 44% to $0.19.
Pinterest said it was starting to narrow the gap between U.S. and international ARPU, but that there was a lot more room to go. For most ad platforms, the U.S. has the best monetization levels, but Pinterest has always lagged its competitors in international markets. It noted that it was seeing strong success with lower funnel and performance ad budgets in Europe with retailers, while reseller partners and its Google partnership were helping it in emerging markets.
Overall revenue for Pinterest climbed 17% year over year to $988 million, ahead of the $975 million consensus estimate compiled by data analytics provider LSEG. U.S. and Canada revenue rose by 11% to $745 million, while European revenue jumped 34% to $191 million. Revenue from its "rest of world" segment soared 65% to $63 million.
Turning to profitability, Pinterest saw its adjusted EBITDA climb 25% year over year to $251 million. Meanwhile, adjusted earnings per share (EPS) jumped by 38% to $0.33. Analysts at LSEG were looking for adjusted EPS of $0.35, and adjusted EBITDA of $233 million, according to business news tracker StreetAccount.
Pinterest forecasts third-quarter revenue to be between $1.033 billion and $1.053 billion, representing 15% to 17% growth year over year. That midpoint is solidly ahead of the $1.025 billion analyst consensus.
The company said it is seeing some effects from tariffs, with some Asia-based e-commerce retailers lowering spending. However, it said its geographical diversification has helped mitigate the impact. And management says it has been seeing strong growth among younger users, with 50% of its user base now Gen Zers.
Image source: Getty Images.
Should investors buy the dip?
Pinterest's second-quarter results were arguably better than its first-quarter results, when the stock rallied. Both its revenue and EPS growth accelerated, and its international metrics were also better. In addition, its future guidance was also stronger.
The company's upgrades to its platform appear to be resonating with younger users, who are now using its multimodal search. Meanwhile, advertisers are also benefiting from the improving functionality, automation, and effectiveness of its Performance Plus ad platform
Turning to valuation, the stock trades at a forward price-to-earnings ratio (P/E) of about 19 based on 2025 analyst estimates and 16 based on the 2026 consensus. Given its revenue and profitability growth, I would view that as cheap.
With Pinterest continuing to transform its business and seeing strong momentum in its international segment, I would be a buyer of the stock on this dip.
