Pinterest (PINS +0.31%) shares plunged after the online vision board operator's third-quarter earnings results missed analyst estimates and the company issued cautious guidance as a result of tariffs. Let's take a closer look at Pinterest's results to see if this dip is a buying opportunity.
Accelerating growth
Pinterest has embraced artificial intelligence (AI) to make its platform more attractive to both users and advertisers, and for the most part, that continues to be a driving theme. However, tariffs affected the ad spending of large U.S. retailers, especially in categories like home furnishings, which affected its Q3 results. It expects to continue to see a moderate pullback in ad spending from U.S. retailers moving forward.
However, behind the numbers, the company continues to make good progress. It saw a 44% increase in the quarter in visual searches that were powered by its proprietary multimodal large language model (LLM). Meanwhile, it is testing a new voice-activated conversational Pinterest AI assistant in the U.S. to help users better discover products, with queries such as "What outfits might match this theme?"
Together, these AI innovations are helping transform its platform into more of an AI-powered shopping assistant. It also continues to integrate shopping catalogs into its platform, including from Amazon, to allow for a push-button buying experience.
NYSE: PINS
Key Data Points
In addition, the company's Pinterest Performance+ suite is starting to help advertisers improve the performance of their campaigns. It said retail advertisers that are using its solution are seeing a 24% improvement in conversions.
While the U.S. saw struggles due to tariffs, metrics from other regions were strong. Pinterest's monthly active users (MAUs) increased by 12% to 600 million, led by a 16% increase in "rest of world" users to 347 million and an 8% rise in European users to 150 million. U.S. and Canada MAUs, meanwhile, rose 4% to 103 million.
Pinterest's global average revenue per user (ARPU) rose by 5% year over year to $1.78, but the bigger story was its growth in international markets. European ARPU soared by 31% to $1.31, while "rest of world" ARPU surged 44% to $0.21. U.S. and Canada ARPU, meanwhile, increased by 5% to $7.64. Pinterest said that shopping ads are driving international ARPU growth, with shopping ads now 30% of international revenue, up from just 9% in Q3 2023.
Overall revenue for Pinterest jumped 17% year over year to $1.05 billion, which was in line with consensus estimates as compiled by LSEG. U.S. and Canada revenue increased by 9% to $786 million, while European revenue climbed 41% to $193 million and "rest of world" segment revenue surged 66% to $70 million.
Turning to profitability, Pinterest saw its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rise by 24% year over year to $306.1 million. Adjusted earnings per share (EPS) climbed by 19% to $0.38, missing the $0.42 consensus.
Looking ahead, Pinterest projected fourth-quarter revenue to be between $1.313 billion and $1.338 billion, representing 14% to 16% growth year over year. That midpoint was just below the $1.34 billion consensus. It's looking for adjusted EBITDA to be between $533 million to $558 million.
Image source: Getty Images.
Time to buy the dip
The reaction to Pinterest's Q3 results looks overly harsh. The company is seeing some pressure from being more exposed to large U.S. retailer advertisers, especially in the home furnishings space. However, it still saw solid growth in the U.S., while internationally, it is making great strides.
At the same time, the underlying technological transformations Pinterest is making are real. The business does have some economic sensitivity, but the long-term trends remain in place. Meanwhile, the company's management tends to err on the side of caution, so it's not going to give an aggressive outlook when there are some signs of consumer weakness in the U.S.
Regarding valuation, the stock trades at a forward price-to-earnings ratio (P/E) of about 12 based on 2026 analyst estimates. This is a company that's still growing revenue in the mid-teens and EPS by nearly 20%, while showing strong international user and ARPU growth. That's a bargain-bin price.
While sentiment is down, I'd be a buyer of the stock around current levels, especially with activist firm Elliott Management owning a 4% stake in the company.
