Pinterest shares soared 18% after the report. What was the driver of growth

Shares of the owner of the popular social network Pinterest, which has been called a visual search engine, jumped nearly 18% in the premarket on Ma. 5. The company surprised Wall Street with both last quarter's sales and its outlook for the current quarter.

Pinterest expects its revenue to grow 14-16% in the second quarter to between $1.13 billion and $1.15 billion. Even the lower end of that range beat the forecasts of analysts surveyed by Bloomberg: they were on average expecting only $1.12 billion.

The company's first-quarter sales rose 18% to $1.01 billion, against Wall Street estimates of $966 million. Adjusted earnings per share came in at 27 cents versus expectations of 23 cents. EBITDA reached $207 million and could increase to $256 million to $276 million in the second quarter, Pinterest announced. The average is slightly below the average analysts' forecast.

Pinterest's user base also showed positive dynamics: as of March 31, the number of active users per month grew 11% year-over-year to 631 million. However, despite the growth in operating performance, the net loss for the quarter amounted to $73.6 million, compared to expectations of $41.5 million.

Pinterest CEO Bill Redi attributed the continued positive momentum to the availability of unique visual search products. Now the company, which processes more than 80 billion searches monthly, is reallocating resources in favor of artificial intelligence. In January, Pinterest announced it was cutting nearly 15% of its staff to prioritize AI developments, including its Performance+ advertising package, which automates creatives and personalizes targeting, Reuters highlights.

These technological improvements are helping the platform offset pressure from major retailers that have cut back on spending due to US duties and geopolitical instability, she explained. Pinterest CFO Julia Donnelly noted that AI tools began to offset that decline at the end of the quarter. She said Pinterest is tracking the impact of the military conflict in Iran that began in February: rising oil prices have negatively impacted business in Europe and several other regions, but these factors have already been factored into the forecast.

In parallel, a focus on attracting small and medium-sized businesses helps reduce dependence on the budgets of major advertisers. To find new sources of revenue, Pinterest acquired tvScientific in February. The deal should help advertisers go beyond social networks into the sphere of connected television (CTV), writes CNBC.

Lenny Zéphirin, head and analyst at The Zéphirin Group, says large advertisers remain important for stability but are not the main driver of Pinterest's growth. He estimates that SMB demand for the company is improving, but remains cyclical and sensitive to macroeconomic issues, Reuters reports.

Pinterest shares have started to recover from February's drop - the biggest in three years - caused by weak forecasts. From the beginning of the year to the publication of the report, the value of the company's securities fell by 19%.

Wall Street's views on the company's prospects have diverged: 20 analysts recommend increasing the stake in the company, while 21 analysts take a neutral stance, advising neither to buy nor sell these securities. At the same time, there is a trend towards caution: three months ago there were 11 more bullish ratings. Pinterest has only one recommendation to sell.

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