Pinterest decided to cut up to 15% of its staff due to its focus on AI. What happened to its stock?

American online visual bookmarking service Pinterest has announced its intention to lay off hundreds of employees in order to redirect funds to the development of products with artificial intelligence. The mass layoffs indicate increased pressure on the company from the leaders of the digital advertising market, who are able to spend billions of dollars to implement AI technologies.

Pinterest plans to cut "less than 15%" of its staff and reduce its office space to "reallocate resources" in favor of developing and promoting AI-powered products, the company said in a filing on the U.S. Securities and Exchange Commission (SEC) website. Pinterest expects to complete the restructuring by October 2026. According to Bloomberg estimates, more than 700 people may be cut.

Shares of Pinterest at the main trading session of the New York Stock Exchange on January 27 fell by almost 10% and, as Barron's notes, approached the lowest closing price since 2023. In over-the-counter trading on January 28 in the U.S., quotes correct upward by 2%.

The restructuring at Pinterest "suggests more aggressive investment in building out its AI capabilities, which will put pressure on gross margins," wrote Bloomberg Intelligence analysts Mandeep Singh and Robert Biggar. On the other hand, the introduction of advanced AI will allow for better ad targeting and better ad pricing, something Pinterest is currently behind Meta and other major players in, the experts added.

Wedbush analyst Scott Devitt saw the news of Pinterest's layoffs as confirmation of the risks of increased competition from artificial intelligence-based platforms. In a note to clients, Devitt pointed out that AI adoption is shortening the path from product search to purchase on competing platforms, threatening smaller players like Pinterest with a loss of digital advertising market share, MarketWatch reports.

According to FactSet, Wall Street's confidence in Pinterest stocks has waned slightly over the past three months, with the number of recommendations to buy (Buy and Overweight) dropping from 36 to 32, while those advising to "hold" the securities (Hold) rose from 6 to 9. As a result, the consensus changed from "Buy" (Buy) to a more cautious "Above Market" (Overweight). The average target price of $36.27 per share implies a 55% upside on a one-year horizon.

This article was AI-translated and verified by a human editor