Pinterest Rides on Solid ARPU Growth: Will the Uptrend Continue?

Pinterest, Inc. PINS is witnessing solid growth in average revenue per user across multiple regions. In the third quarter, global average revenue per user (ARPU) stood at $1.78 compared with the year-ago quarter’s figure of $1.7. ARPU in Europe increased 31% year over year to $1.31, backed by healthy demand in the retail vertical.

The United States and Canada rose 5% year over year to $7.64, driven by strength in retail, CPG, Telecom and entertainment. ARPU from the Rest of World increased 44% year over year to 21 cents. The company has reached 600 million active users, with Gen Z comprising the largest and fastest-growing user base.

In the last several quarters, the company has heavily invested in the personalization of its platform. Leveraging AI, PINS is constantly tracking users’ evolving tastes and preferences. Pinterest’s AI-powered shopping assistant, available to all monthly active users, provides a seamless journey from visual search and discovery to the advertiser’s product checkout page. The platform has evolved from a shopping destination to a hub for visual search and queries. In the third quarter, queries grew 44% year over year. 

AI investments have significantly boosted visual search and recommendation capabilities. In addition to improving content personalization, PINS has also introduced AI-powered tools for advertisers, allowing them to improve reach to relevant users.

As per our estimate, in the fourth quarter, the company is projected to report an ARPU of $1.62 from Europe, indicating 17.1% year-over-year growth. ARPU from the United States and Canada is projected to reach $9.13, indicating 1.4% growth year over year. ARPU for the Rest of World is expected to be 26 cents, indicating growth of 38.6% year over year.

How are Competitors Faring?

Pinterest faces competition from SNAP, Inc. SNAP and Reddit RDDT in the social media space. In the third quarter, Reddit’s ARPU grew 41% year over year to $5.04. U.S. ARPU increased 54% to $9.04, whereas the International ARPU climbed 39% on a year-over-year basis to $1.84. Reddit’s investment in AI-powered tools is increasing search-led engagement.

SNAP boasts a strong user base of Gen Z and young millennials. SNAP’s ARPU increased 2% year over year to $3.16. The ARPU of North America and Europe climbed 8% and 19% on a year-over-year basis, respectively, while ARPU for RoW increased 2%.

PINS’ Price Performance, Valuation and Estimates

Pinterest has declined 12.8% over the past year against the industry’s growth of 4.9%.

From a valuation standpoint, Pinterest trades at a forward price-to-sales ratio of 3.62, below the industry.

The Zacks Consensus Estimate for Pinterest’s earnings for 2025 has decreased over the past 60 days.

Pinterest currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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