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Pinterest Profit Miss Overshadows Strong Gen Z User and AI-Driven Growth

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Pinterest reported second-quarter results that missed profit expectations, causing shares to drop over 11% in after-hours trading despite strong revenue and user growth. The company posted adjusted earnings per share of 33 cents, below analysts’ estimate of 35 cents.

Pinterest’s revenue grew 17% year-over-year to $998.2 million, surpassing expectations of $974.8 million. The platform’s user base has expanded significantly, with Gen Z now making up more than half of its users, fueling growth. Additionally, Pinterest’s AI-powered advertising suite, Performance+, has gained traction among mid-market advertisers, cutting campaign creation times by half.

Looking ahead, Pinterest forecast third-quarter revenue between $1.03 billion and $1.05 billion, roughly in line with analyst expectations but signaling no acceleration from the previous quarter’s growth rate. Analysts noted that high market expectations may have contributed to the selloff following the earnings report.

The company faces competitive pressure from peers like Meta and Reddit, which reported strong quarterly results, while Snap saw its slowest revenue growth in over a year. Changes in U.S. import duty rules also tightened advertising budgets for smaller platforms like Snap, indirectly benefiting larger platforms like Pinterest.

Pinterest’s ad pricing fell 25% year-over-year, impacted by a growing share of international ad impressions where rates are lower. The company’s monthly active users (MAUs) reached 578 million, up 11% year-over-year and beating estimates, though user growth slowed compared to the previous quarter.

Analysts suggest that Pinterest’s user base may be nearing saturation despite ongoing AI enhancements aimed at driving growth.

Snap Shares Plunge as Ad Glitch and Competition Stall Growth

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Snap’s (SNAP.N) shares fell nearly 21.5% in early trading on Wednesday following a weak quarterly performance and intensifying competition, highlighting its ongoing challenge to keep pace with AI-driven rivals.

The company’s slowest revenue growth in over a year was driven by advertisers cutting marketing budgets amid economic uncertainty and favoring larger platforms like TikTok and Meta’s Facebook and Instagram. A glitch in Snap’s ad-buying platform, which caused ads to be delivered at discounted rates, also contributed to the slowdown. Although Snap’s revenue met estimates, it was a significant drop from the double-digit growth seen over the past five quarters. Snap’s market value could fall by approximately $3.24 billion if losses persist.

Analysts at MoffettNathanson noted advertisers prefer platforms with direct access to purchase-ready users, diverse marketing tools, and clear ROI metrics — areas where Snap currently lags.

Snap’s performance contrasts with competitors Meta and Reddit, which reported strong second-quarter results, driving their shares up by 30.3% and 21.8% respectively this year, compared to Snap’s 12% decline. Following the results, at least 14 brokerages cut Snap’s price target, bringing the median to $9.

Snap is betting on its Sponsored Snaps video ad format, rolled out more broadly in June across the U.S. and other markets, which has driven increased user engagement and actions.

Morgan Stanley analysts said, “For Snap to capitalize on improvements in engagement, it must better demonstrate ad efficacy to advertisers and reduce barriers to adopting its products.”

Meta Unlikely to Further Change Pay-or-Consent Model, Faces Imminent EU Fines: Sources

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Meta Platforms is expected to maintain its current pay-or-consent model without further adjustments, making it nearly certain to face new antitrust charges and significant daily fines from the European Union, according to sources with direct knowledge of the situation.

The European Commission recently warned Meta that limited tweaks to the model would not satisfy the Digital Markets Act (DMA), which aims to limit Big Tech’s market power through strict regulations. Meta was already fined €200 million ($234 million) in April for breaching the DMA with its pay-or-consent approach from November 2023 to November 2024.

Although Meta modified the model in November 2024 to reduce the use of personal data for targeted ads, the EU remains unsatisfied. Sources indicated that unless circumstances change, Meta will not propose further revisions, prompting expected new charges and daily fines that could reach up to 5% of the company’s average daily global revenue, starting from June 27. The final decision on fines has yet to be finalized.

Following the Reuters report, Meta’s shares dropped 1.7% mid-session. Meta declined to comment on the latest developments but reiterated previous statements asserting its compliance with the DMA, highlighting the broad choices offered to European users and accusing the Commission of unfairly targeting its business model.