Pinterest Inc Earnings - Q1 2025 Analysis
Positives
- Adjusted EBITDA was $172 million, up by 300 bps YoY, due to robust revenue growth and expense discipline.
- The company generated revenue of $855 million in Q1, up by 16% YoY due to strong performance across the full funnel.
- The company ended Q1 with 570 million global monthly active users, growing by 10% and reaching another record high.
- The company is seeing strengths in its business, and trends remain healthy both in Q1 and the early signals on Q2.
- The company is putting up all-time highs in users and all-time highs in depths of engagement as reported in its 10-K.
Q&A Highlights - Q1 2025
Analyst asked about the impact of tariffs on retail and CPG categories in Pinterest's pipeline.
Julia B. Donnelly, Chief Financial Officer, explained that Pinterest has seen strengths in its business, with trends remaining healthy both in Q1 and early signals for Q2. The company has observed a reduction in spend from Asia-based e-commerce retailers in the US, but has also seen a geographic diversification from those retailers to Europe and the rest of the world. The company's investments over the past three years against multiple revenue levers have helped build a more resilient platform, and the company will continue to execute on key strategic initiatives.
Analyst asked about Pinterest's progress in controlling the platform and evolving products, and the receptivity across the advertising landscape to what the company has built so far.
William J. Ready, Chief Executive Officer, explained that Pinterest has made significant progress in controlling the platform and evolving products. The company has focused on building a shopping destination for users, particularly Gen Z, and a performance ad platform driven by AI-enabled tools. Pinterest has also opened up a performance ad platform for advertisers, making it easier for them to take action on commercial intent and get great return on their ad spend. The company has a unique flywheel effect between user engagement and commercial content, and is now moving into international markets with the same shopping and lower funnel playbook. Pinterest is bringing in new sources of demand and meeting advertisers where they are, both on measurement and the ability to bring in new demand. The company is well down the path in demonstrating the unique value proposition for users and advertisers, and is still in the early innings of this journey.
Analyst asked about the progress of Performance+ and the impact on advertiser spend.
William J. Ready stated that Performance+ has made significant progress in driving adoption among larger advertisers, leading to strong performance and share shift. The company has not provided a percentage lift in same advertiser spend, but noted that advertisers can choose to adopt a la carte or the whole suite, and those that have adopted are seeing strong results. The company is seeing consistent progress, with 80% of campaigns on Performance+ outperforming traditional campaigns, and beta test results showing 20% CPA improvements on shopping campaigns. The company is focused on extending always-on performance budgets, becoming a secular share taker, and driving growth through better implementation of measurement tools and making campaign creation easier.
Analyst asked about the company's strategy for third-party demand.
William J. Ready stated that the company's strategy for third-party demand has not changed, and that it will continue to seek out demand from third parties as a complement to its first-party business. The company is testing and iterating within its business to find the right sources of demand, and has decided to work with Magnite, a leading SSP, as its next partner to help aggregate smaller sources of demand. The company does not plan to scale additional SSPs in the immediate future, but views this partnership as a steady progression and build of the business. The company is focused on making it easier and easier for advertisers to reach great commercial intent on its platform and meeting advertisers where they are.
Analyst asked about the accelerating impression growth and associated price declines on a per impression basis.
The company's global ad impression growth and global pricing decline are primarily driven by international mix shift. The company has added eight additional territories to its international markets, which have lower total addressable markets and lower cost per impression or ECPMs on average. This international mix shift puts downward pressure on global pricing, but it's clearly been a positive to net revenue overall, and importantly, the company is seeing that show up in the accelerating revenue trends in its Rest of World market for the last several quarters.
Analyst asked about the broader macro volatility impacting ad spend, particularly with the more brand-oriented advertisers, and if the introduction of Performance+ is helping drive and tie together that full funnel campaign dynamic that the company has been talking about for years.
The company's lower funnel business has become very compelling, which is helping them bring the promise of the full funnel to life. Advertisers that do both upper and lower funnel objectives with the company see 2 times the click-through rate. The company's full funnel approach is unique, as it allows users to get a seamless shopping experience from upper funnel inspiration all the way through to the click and conversion. The company believes that this approach is particularly helpful in uncertain times, as it allows CMOs to tell their brand story while still driving lower funnel conversions.
Analyst asked about Pinterest's capital allocation strategy, specifically regarding stock buybacks and how they plan to use their $1.7 billion authorization.
Julia B. Donnelly, Pinterest's Chief Financial Officer, explained that the company has already repurchased $175 million of shares in Q1 and utilized $94 million in net share settlement of equity awards. They have a multi-year plan to use their discretion in determining the timing and amounts of buybacks, particularly when the stock is trading at an attractive valuation level. Pinterest's overall capital allocation framework remains consistent with their Investor Day strategy, which includes investing in product and technology innovation, preserving flexibility for opportunistic and disciplined M&A, and using cash for stock buybacks to mitigate dilution.
Analyst asked about how Pinterest plans to keep engagement going in a world where AI is impacting search, specifically in relation to their intersection of search and social.
William J. Ready, Pinterest's Chief Executive Officer, explained that Pinterest has a unique space at the intersection of social, search, and commerce. They have a curation signal that gives them a unique advantage in using AI, and their multimodal model that powers visual search is 30% more likely to identify and recommend relevant content from their corpus than leading off-the-shelf models. He also mentioned that AI thrives on feedback loops, and Pinterest has a unique feedback loop in their users curating their purchases before they make the purchase, which gives them a rich signal. Pinterest is focused on purely visual, commercial intent, and unique curation, which he believes is a durable advantage for them in terms of what experiences they're able to deliver versus other experiences that don't have that or are more focused on general purpose. He also mentioned that there is so much growth in specific areas of search, and Pinterest is not in the game of general-purpose search, but they are putting up all-time highs in users and engagement, reflecting their unique curation behavior and what that allows them to uniquely do with AI based on their signal.
