Why Did Pinterest Plunge 12.51% Despite Revenue Growth?

On August 8, 2025, Pinterest's stock experienced a significant drop of 12.51% in pre-market trading, overshadowing its robust revenue and user growth.

Pinterest's second-quarter earnings report revealed a mixed bag of results. While the company reported a 17% year-over-year revenue increase to $998.2 million, it missed analysts' earnings per share (EPS) estimates. The EPS miss was attributed to elevated operational costs associated with scaling AI infrastructure. Despite this, Pinterest's GAAP net income of $39 million and 33% growth in adjusted EBITDA to $251 million highlighted its improving profitability.

The company's user base grew to 578 million global Monthly Active Users (MAUs), with Gen Z users now comprising over half of its audience. This demographic shift aligns with Pinterest's strategic pivot to become a personalized shopping destination and an AI-powered performance platform for advertisers. However, the stagnant user growth in core US/Canada markets raised concerns about the platform's ability to sustain its momentum.

Pinterest's AI-driven ad strategy is a key differentiator. The launch of Pinterest Performance+, an AI automation suite, has delivered measurable results, including a 10% improvement in cost per acquisition (CPA) and cost per click (CPC) for advertisers. Strategic partnerships, such as the collaboration with Instacart, enable closed-loop measurement systems that track the full customer journey from ad exposure to purchase, positioning Pinterest as a go-to platform for brands seeking high-intent audiences.

Despite these advancements, Pinterest's heavy reliance on advertising revenue (over 90%) exposes it to macroeconomic volatility and shifting advertiser priorities. The company's forward price-to-sales ratio of 5.86 implies aggressive expansion expectations, which may not materialize if execution falters. Investors will need to monitor key metrics such as cost per acquisition, user retention, and ARPU growth to assess Pinterest's long-term prospects.