Investors couldn't ask for much more from visual search and idea platform Pinterest (PINS 4.04%) regarding its third-quarter financial results. Revenue growth accelerated, and the company swung to a profit.
"As we lean into Pinterest's unique differentiators as a visual search, discovery, and shopping platform, we're finding our best product market fit in years," said Pinterest CEO Bill Ready in the company's Q3 earnings report.
Topping it all off, Pinterest provided an outlook for strong growth in its important holiday quarter, too.
Here's a closer look at the metrics that matter.
Accelerating growth
Pinterest's efforts to engage its user base and improve its measurement tools and ad products for advertisers are paying off nicely. The company's Q3 revenue rose 11% year over year to $763 million. This soared past analysts' consensus forecast of about $743 million.
Importantly, Pinterest's Q3 results highlight a trend of accelerating revenue growth rates. The double-digit growth the company reported during the quarter was up from 5% and 6% growth in the first and second quarters of 2023, respectively.
Improving margins
Also worth highlighting is the company's massive bottom-line improvement. Pinterest reported a profit of $6.7 million in the quarter. This was up from a loss of about $65 million in the year-ago quarter. This means Pinterest net profit margin improved from negative 10% in the year-ago quarter to 1%.
Pinterest's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as a percentage of revenue also improved dramatically, increasing from 11% in the year-ago quarter to 24%.
Strong user growth
Revenue growth is great. But it may be short-lived if underlying user trends aren't trending well. Fortunately for Pinterest shareholders, they are. The company said its monthly active users increased 8% year over year to 482 million. This is up from 465 million three months earlier. Good user engagement is what keeps advertisers coming back, so this trend bodes well for the company's revenue potential.
Upbeat guidance
With such strong momentum across users and revenue in Q3, it's not surprising that the company is providing a robust outlook for its fourth-quarter revenue. Management said it expects Q4 revenue to grow at a rate of 11% to 13% year over year. The midpoint of this guidance range implies yet another acceleration in the company's top-line growth rate. In absolute terms, this guidance implies Q4 revenue of between approximately $974 million and $991 million -- a huge sequential uptick from Q3 revenue of $763 million as advertisers pile in with robust advertising budgets for the holidays.
This is an encouraging outlook for investors in both Pinterest and other advertising stocks, as some investors were likely worried an uncertain global economy could lead to slower growth in advertiser spend in Q4. But Pinterest's Q4 guidance suggests advertisers remain optimistic.
It's worth noting that Pinterest's fourth-quarter guidance was provided about a month into Q4, giving management quite a bit of visibility into the period's trends. So investors can take this guidance seriously. In addition, this guidance suggests the company likely started its critical holiday quarter with significant momentum.
