Pinterest’s revenue growth slowed in the third quarter, missing the company’s guidance, while user gains did not translate into stronger revenue per user. Investors are watching whether competition in AI and digital advertising from Meta and Alphabet could put further pressure on Pinterest’s ad business. Management says it is extending strategies that have improved results in North America to international markets, and expects fourth-quarter revenue to grow 8% to 12% year over year.
Revenue misses guidance as ARPU growth stalls
Pinterest reported third-quarter revenue of $1.17 billion, up 12% year over year but below its guidance range of $1.19 billion to $1.21 billion. Growth slowed from the previous quarter, showing that the pressure is visible in the company’s operating results, not just its share price.
Monthly active users continued to increase, and the key U.S. and Canada markets also posted sequential growth. But average revenue per user (ARPU) rose just 1% year over year. In Europe, ARPU fell 7%, weighing on overall monetization. For a platform whose main source of revenue is online advertising, the gap between a growing user base and limited revenue gains per user was a central concern in the quarter.
Adjusted EBITDA was $339 million, near the low end of the company’s guidance range of $335 million to $355 million. Cost controls can sometimes cushion weaker revenue, but the profit measure also landed near the bottom of the forecast range, suggesting operating performance did not substantially offset pressure on sales.
European policy changes weigh on cross-border sellers
On the earnings call, management attributed part of the slowdown to changes in Europe’s duty-free policy for low-value goods. The company said cross-border sellers had scaled back their businesses, affecting the quarter-over-quarter change in global revenue growth by about 3 percentage points. Management said it is applying in other regions the approaches that have supported growth in the U.S. and Canada, and has seen early progress.
The explanation also raises questions about Pinterest’s relative performance. Meta reported 26% year-over-year revenue growth over the same period and was also affected by the relevant regulatory changes. The companies have different business models and regional revenue mixes, so their growth rates alone do not show that the policy changes had an identical effect on each. The gap does, however, highlight the growth pressure facing Pinterest.
Management said it hopes to restore growth gradually as its international business improves, with the longer-term aim of returning to the mid-to-high teens revenue growth rates it achieved historically. Results will need to validate that goal. For the near term, Pinterest forecast fourth-quarter revenue of $1.425 billion to $1.475 billion, equivalent to year-over-year growth of 8% to 12%.
Cash exceeds convertible notes as AI presents risks and opportunities
At the end of the third quarter, Pinterest held $1.47 billion in cash and investments, compared with $982.1 million in convertible notes, leaving it in a net cash position. That provides some cushion against business fluctuations, but does not directly address the slowdown in revenue monetization.
AI presents Pinterest with both competitive risks and potential product opportunities. Large advertising platforms such as Meta and Alphabet could continue to compete for ad budgets with advantages in scale and technology. If Pinterest loses market share, both user engagement and ad revenue could come under pressure.
Management, meanwhile, said about 80% of searches using assistants on Pinterest have commercial intent, compared with roughly half of searches elsewhere on the platform. The company hopes to turn those searches into advertising and commerce opportunities, but that figure alone does not show that AI is already generating enough revenue to offset competitive pressure.
The key questions are whether Pinterest can keep growing its user base, lift ARPU across regions and deliver on its plans to improve international results. Intensifying ad competition, weaker user engagement or a recession that reduces advertising spending could further delay a recovery. Fourth-quarter revenue and subsequent data from Europe will offer further evidence of the company’s progress.