Pinterest Reports Strong Q2 Earnings Driven by Amazon Partnership and AI Advances

Pinterest, the popular image pinboarding and shopping inspiration platform, recently shared updates regarding its partnership with Amazon and ongoing initiatives in artificial intelligence (AI) during its Q2 2023 earnings call. In April, Pinterest announced a multiyear collaboration with Amazon, marking the e-commerce giant as its first partner for third-party advertisements. The company indicated during the investor call that these efforts are advancing more rapidly than anticipated. Pinterest highlighted how its AI investments are enhancing various aspects of the platform, including user engagement, content relevance, and ad performance.

With the Amazon partnership in full swing, users who click on Amazon ads within Pinterest will be redirected to Amazon to complete their purchases. Investors were eager for insights into how this partnership contributes to Pinterest’s financial performance.

Although Pinterest cautioned that the partnership will involve a multiquarter rollout and significant revenue impacts may not materialize until early 2024, CEO Bill Ready expressed satisfaction with the current implementation pace and initial outcomes. He stated that live traffic testing with Amazon ads yielded promising results and suggested that Amazon would bring additional shoppable content to Pinterest.

While specifics on early test results were not disclosed, Ready noted that the initial outcomes exceeded expectations in relevance, contributing to more meaningful shopping content. He emphasized that this positive trend supports Pinterest's view that it can increase its advertising load effectively. The company reported an over 30% increase year-over-year in overall monetizable supply while boosting user engagement, showcasing its ability to grow ad visibility while ensuring content remains relevant for users.

The executive highlighted that the partnership is progressing ahead of expectations but also emphasized the importance of maintaining user relevancy. AI technologies are being harnessed to enhance personalized content delivery, improve ad relevance, and stimulate user engagement by providing actionable content from diverse sources, including users, creators, publishers, and retailers.

A noteworthy feature introduced is the "shop-to-look" module for home décor and fashion Pins, utilizing AI to suggest shoppable products tailored to users' interests. Additionally, Pinterest attributes its 8% global monthly active user growth—reaching 465 million—to AI, which also boosts user engagement.

Having transitioned to next-gen AI technologies a year ago, Pinterest can now leverage recommender models 100 times larger than before, integrating its first-party proprietary data with advanced AI computer vision and search technologies. This transition has resulted in a 10-point year-over-year increase in perceived relevance, now at 94%. Pinterest is also curating content intended for sharing to enhance retention among core users and encourage re-engagement from inactive users.

In the advertising space, AI technologies have driven a 5% reduction in cost per action and a 10% increase in click-through rates, according to the company. Addressing concerns about competition from major players like Google, Meta, and Apple, Ready noted that these tech giants are externalizing capabilities through cloud computing, while the open-source community is rapidly progressing.

In terms of financial performance, Pinterest reported a 6% increase in revenue to $708 million for the quarter, surpassing analyst expectations of $696 million. Adjusted earnings per share rose from $0.11 to $0.21, exceeding the forecasted EPS of $0.12. However, following the earnings report, Pinterest's stock declined as Wall Street reacted to Q3 guidance that fell short of expectations.