Pinterest results dazzle Wall St as ad business booms

(Reuters) -Pinterest Inc delivered its first annual net income on Thursday as strong advertising revenue drove its fourth-quarter results past Wall Street expectations and softened the blow from a shrinking user base.

The image-sharing firm’s shares surged up to 20% in extended trading, bouncing back from a dismal Thursday session in which tech stocks were rattled by Meta Platforms Inc’s disappointing earnings outlook and weak user numbers.

Pinterest’s monthly active users (MAUs) also declined, dropping 6% to the lowest since June 2020 as the pandemic-driven surge in demand cooled off.

But the company has doubled down on efforts to boost advertising income, focusing on scaling up video features like Pinterest TV and Idea Pins, and boosting influencer marketing in a space dominated by YouTube, Instagram and TikTok.

Chief Financial Officer Todd Morgenfeld said Pinterest was investing in native video content and creator-led content as it believes this adds to engagement and revenue.

“The early data make us cautiously optimistic,” he said.

Pinterest’s revenue in the quarter ended Dec. 31 rose 20% to $846.7 million, surpassing analysts’ estimate of $827 million, according to Refinitiv IBES data.

Snap Inc also posted strong results on Thursday as its advertising business bounced back from the effects of Apple Inc’s privacy changes faster than expected.

However, Pinterest saw a 12% decline in the United States, its home market, following certain changes to Google’s search algorithm, which limited traffic.

“Engagement headwinds from search algorithm changes and from time spent on competing platforms are more persistent and could potentially disrupt normal seasonal trends,” Morgenfeld said.

Pinterest’s MAUs – a key metric that shows engagement levels on the website – was 431 million for the quarter, missing estimates of 447.95 million, according to FactSet.

Net income was $175 million, compared with $207.8 million a year earlier.

Excluding items, it earned 49 cents per share, also higher than estimate of 45 cents.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Devika Syamnath)