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Pinterest shares plummeted 20% on Wednesday after lackluster third-quarter earnings as advertising took a hit from larger retailers dealing with tariffs.
The company posted a profit of 38 cents per share adj., while analysts polled by LSEG expected earnings of 42 cents per share. However, the platform’s revenue did meet analyst estimates of $1.05 billion.
“Tariff-related weakness showed up for the first time in our digital ads universe and will reinforce PINS’ lack of customer diversity for the bears and higher macro sensitivity,” RBC wrote in an analyst note.
Third-quarter sales in the U.S. and Canada came in at $786 million, lower than StreetAccount’s estimates of $799 million.
Pinterest finance chief Julia Donnelly said during the earnings call that the company faced “some pockets of moderating ad spend” in the two countries during the quarter due to unnamed “larger U.S. retailers” that faced pressure on their margins from tariff-related issues.
Donnelly added that the company expects these trends to continue with the addition of a new tariff from President Donald Trump that will impact the home furnishings category.
Several banks lowered their price targets following the earnings report, pointing to increasing competition from larger social platforms like Instagram and TikTok and concerns over macro headwinds.
Citi analyst Ronald Josey noted that the company’s international monetization could “plateau or decelerate faster than expected.”
However, 81% of analysts still maintained an outperform or buy rating.
JPMorgan remained overweight on the stock despite lowering its price target, as the company leans into more artificial intelligence initiatives.
“We recognize that near-term macro pressure & PINS’s outsized exposure to big retailers & home furnishings may keep the shares range-bound near-term, but we remain constructive on PINS’ user growth, deepening engagement, & overall monetization potential,” JPMorgan’s Doug Anmuth wrote.
The company also issued a weak fourth-quarter forecast, expecting revenue to come between $1.31 billion and $1.34 billion. The midpoint of that range, $1.325 billion, missed Wall Street’s projections of $1.34 billion.
“I did not think they were nearly as negative on the holiday season as people are making it out,” CNBC’s Jim Cramer said Wednesday on “Squawk on the Street.” “They are very muted. [CEO] Bill Ready is not a guy that likes to talk his books up.”
Rosenblatt analyst Barton Crockett downgraded shares to neutral from buy, citing concerns for how the company will be able to compete against the surging growth of chatbot capabilities.
“Chatbots are not meaningfully in Pinterest’s space today,” Crockett wrote. “Google has a comparable service, Mixboard, that seems more a test than a meaningful push. But it is absolutely likely, we believe, that as chatbots ramp up advertising and content for consumers with commercial intent, that Pinterest’s wheelhouse will become their wheelhouse.”
Bank of America analyst Justin Post noted that while revenues fell short, the company is continuing to post steady growth and is in “the early stages of realizing AI-driven gains.”
Ready said in the earnings call that the company is working to integrate more AI throughout the platform, including a new feature that will curate personalized boards for users. Pinterest also rolled out an AI-powered personal shopping assistant at the end of October.
“Our investments in AI and product innovation are paying off,” Ready said in a statement. “We’ve become a leader in visual search and have effectively turned our platform into an AI-powered shopping assistant for 600 million consumers.”
