Pinterest (PINS) Warns on Growth While Etsy (ETSY) Cuts Staff, Even After Both Beat Estimates

On August 4, Pinterest reported earnings that surpassed expectations but tempered future growth. The company's shares fell by up to 9% in extended trading despite the strong performance. Pinterest posted adjusted earnings of 43 cents per share and revenue of $1.18 billion, exceeding the estimated 36 cents per share and $1.15 billion in revenue.

However, the company's outlook for the third quarter was cautious, projecting revenue between $1.19 billion and $1.21 billion, indicating just a 13% to 15% growth rate. CEO Bill Ready emphasized the importance of utilizing open-source AI models, stating that ignoring them could be a waste of shareholders' money. Pinterest is incorporating a mix of pricey proprietary AI models and more affordable open-weight models through a strategy known as "model routing infrastructure."

According to CFO Julia Donnelly, growth is slowing due to the temporary impact of the World Cup ad boost and increased regulatory pressure on European retailers. Pinterest's monthly active users increased by 11% to 640 million, surpassing analysts' expectations of 635 million. Adjusted EBITDA also beat estimates, coming in at $311 million.

In contrast, Etsy reported solid revenue but announced the layoff of 220 employees, accounting for approximately 12% of its workforce. On August 5, Etsy beat estimates and raised its full-year sales outlook. The company's revenue of $668.3 million exceeded the estimated $649 million, and it increased its outlook for full-year gross merchandise sales growth to a mid-single-digit range from a low-single-digit forecast.

Etsy also announced a $2 billion buyback, partly funded by the $1.4 billion sale of Depop to eBay. However, Etsy reported a $46.7 million net loss, primarily driven by the Depop sale, and a 0.4% decline in active buyers compared to the previous year. This indicates that Etsy is struggling to attract new customers as investors anticipate.

Both Pinterest and Etsy exceeded Wall Street's expectations for their respective second quarter earnings, but their cautious outlooks and recent staffing decisions overshadowed the positive results, highlighting that merely meeting expectations may not suffice to earn investors' patience in the current market. Hedge funds showed a bearish sentiment towards both stocks, with Pinterest experiencing a more significant sell-off compared to Etsy.

The article concludes by suggesting that investors may find better opportunities in certain AI stocks, particularly those benefiting from Trump-era tariffs and the onshoring trend, warning that PINS may not be the best choice due to its uncertain growth prospects.