PINS Q1 Earnings Call: AI-Driven Product Enhancements Support User Growth and Advertiser Adoption

Yahoo

3 days ago

Social commerce platform Pinterest (NYSE: PINS) reported Q1 CY2025 results beating Wall Street's revenue expectations , with sales up 15.5% year on year to $855 million. Guidance for next quarter's revenue was better than expected at $970 million at the midpoint, 0.6% above analysts' estimates. Its non-GAAP profit of $0.23 per share was 9.8% below analysts' consensus estimates.
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Revenue: $855 million vs analyst estimates of $846.9 million (15.5% year-on-year growth, 1% beat)
Adjusted EPS: $0.23 vs analyst expectations of $0.26 (9.8% miss)
Adjusted EBITDA: $171.6 million vs analyst estimates of $162.6 million (20.1% margin, 5.6% beat)
Revenue Guidance for Q2 CY2025 is $970 million at the midpoint, roughly in line with what analysts were expecting
EBITDA guidance for Q2 CY2025 is $227 million at the midpoint, below analyst estimates of $230.8 million
Operating Margin: -4.1%, up from -7.4% in the same quarter last year
Monthly Active Users: 570 million, up 52 million year on year
Market Capitalization: $23.1 billion
Pinterest's first quarter performance reflected continued momentum in user engagement and product innovation, with management emphasizing the platform's growing appeal to Gen Z and international audiences. CEO Bill Ready highlighted investments in visual search and multimodal AI models as central to improving relevance and actionability for users. Management credited deeper engagement across all core regions to these enhancements, while also citing the improved ability of advertisers to reach high-intent audiences. CFO Julia Donnelly noted that strength in retail and emerging verticals, such as financial services and technology, contributed to revenue gains, as Pinterest's evolving performance ad suite and measurement tools attracted more sophisticated marketers.
Looking ahead, Pinterest's leadership expects ongoing investment in AI-driven personalization and international expansion to support further revenue growth and margin improvement. Management believes that broadening adoption of the Performance+ ad suite, enhancements in measurement capabilities, and continued penetration into under-monetized markets will be key drivers. CEO Bill Ready stated, 'We still have a lot more in front of us than behind us,' emphasizing that adoption of new tools and international monetization remain in early stages. CFO Julia Donnelly cautioned that while the company anticipates margin expansion for the full year, the pace will be slower than in previous periods due to increased R&D and marketing investments.
Management attributed the quarter's performance to user growth, AI-powered product advancements, and increased adoption of lower-funnel ad tools, particularly in international markets.
AI-driven personalization: Pinterest's proprietary multimodal AI model now powers visual search and content recommendations, allowing for more relevant and actionable user experiences. This model, which interprets both images and text, is 30% more likely to generate relevant results than leading off-the-shelf models, according to management.
Performance+ ad suite rollout: The company expanded its Performance+ suite, integrating new creative and bidding features. Management reported that 80% of campaigns using Performance+ outperform traditional campaigns, and advertisers adopting these tools see higher conversion rates and increased efficiency.
International monetization progress: Revenue from Pinterest's shopping ad formats grew over three times faster than overall regional revenue in Europe and other international markets. The company is exporting its lower-funnel playbook and expanding partnerships with resellers to broaden its advertiser base outside the U.S. and Canada.
Emerging vertical growth: Management cited financial services, technology, and entertainment as sectors showing accelerating ad spend. Pinterest's appeal to users during key life moments, such as starting a family or major purchases, is attracting advertisers from sectors beyond retail.
Operational efficiency through AI: Internally, over 25% of Pinterest's code is now generated using AI tools, which management says has improved engineering velocity and allowed for more targeted R&D investment. Productivity enhancements are being applied across product development and sales operations.
Pinterest's outlook for the next quarter and full year centers on scaling AI-driven product innovation, expanding international monetization, and balancing investment with disciplined cost management.
Adoption of Performance+ and measurement tools: Management expects broader uptake of the Performance+ suite and privacy-centric measurement solutions to drive increased advertiser spend and improve conversion tracking. The company believes that making campaign creation more efficient and enhancing reporting capabilities will help close the gap between user engagement growth and revenue realization.
International revenue expansion: Pinterest plans to further extend its lower-funnel advertising tools and shopping features to new global markets, with a particular focus on regions where user growth is outpacing monetization. Management sees significant runway as international users represent roughly 80% of the base but a much smaller share of revenue.
Investments in AI and R&D: The company will continue prioritizing investments in AI-powered personalization, visual search, and product velocity. While these investments are expected to support long-term growth, management noted they will result in higher near-term R&D and marketing expenses, which could moderate the pace of margin expansion.
In the quarters ahead, analysts will monitor (1) adoption rates of the Performance+ suite among mid-market and global advertisers, (2) progress in monetizing the growing international user base, and (3) evidence that AI-driven product enhancements are sustaining engagement and conversion gains. It will also be crucial to track whether investments in R&D and marketing support profitable growth as the company scales.
Pinterest currently trades at a forward EV/EBITDA ratio of 18.8×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it's free).
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