Pre-market plummets 20%! Pinterest's Q4 earnings guidance is weak, analysts worry about the impact of AI

Due to fourth-quarter revenue and future guidance falling short of market expectations, coupled with growing concerns about the disruption risks posed by artificial intelligence (AI), Pinterest's stock price experienced a sharp decline in pre-market trading on Friday.

Before the release of its latest financial report, the company's stock price had already dropped 52% over the past year. Data released by the visual search and discovery platform on Thursday evening showed that fourth-quarter revenue reached $1.32 billion, failing to meet the $1.33 billion expected by analysts surveyed by Visible Alpha. Jefferies analysts pointed out that the company's outlook for first-quarter revenue of $951 million to $971 million also disappointed the market. As of the time of writing, Pinterest's stock price fell 20% in pre-market trading.

This week, the U.S. stock market has taken a harsh selling stance against any company showing signs of AI disruption, and Pinterest's earnings release comes at this turbulent time. The main concern for investors and analysts is that AI technology is integrating the "discovery" and "purchase" phases, potentially eliminating the need for intermediary platforms like Pinterest, where "discovery" is its core competitive advantage.

Although CEO Bill Ready emphasized that AI will be a core strategy for the future and attempted to reassure the market through differentiated positioning, analysts warned that the AI risks facing Pinterest are not hypothetical long-term concerns but immediate real challenges. Even if AI capabilities stagnate at current levels, its core use cases are already under threat, making it difficult for buyers to enter even if valuations appear low.

Revenue Shortfall and Immediate AI Risks

Jefferies analyst James Heaney and his team stated in their report that although Pinterest's valuation appears visually cheap, buying in at this time remains challenging due to the company's struggle to escape the "tangible AI bearish narrative."

Heaney pointed out that while the downside risks from AI for many stocks covered by the firm are often based on the assumption of exponential technological advancement, the AI risks facing Pinterest are more direct. He warned that "even if AI capabilities stagnate at current levels, given the overlap in core use cases, Pinterest's risks are immediate." This makes it difficult for buyers to enter in the current environment.

Despite global monthly active users growing to 619 million, exceeding Wall Street's expectation of 606 million, which Jefferies viewed as a positive signal, Heaney emphasized that the main challenge the company faces is finding a bottom for revenue growth amid the emergence of new adverse factors. **

Management Response and Strategic Adjustment

In the face of weak performance, Pinterest CEO Bill Ready admitted during an analyst conference call that he is not satisfied with the revenue performance for the fourth quarter and believes it "does not reflect the results Pinterest can deliver over time." He explained that the company was hit by an external shock related to tariffs, which "disproportionately affected the advertising spending of our top retail advertisers."

Ready emphasized that this quarter highlighted the need for the company to accelerate its pace of action. Later last month, Pinterest announced a restructuring plan to lay off 15% of its workforce and prioritize the development of AI-driven products.

Regarding the AI strategy, Ready stated that the company plans to "put AI at the core of everything we do," from highly personalized user experiences and new features like Pinterest Assistant to enhancing advertiser experiences through Pinterest Performance+ and optimizing internal operations. He attempted to counter market concerns by emphasizing differentiation: "Our differentiation is obvious. We are leveraging AI to drive visual search, discovery, and shopping, rather than generic text-based search."

Advertising Business Under Pressure and Market Sentiment

Pinterest's advertising business has been struggling recently, while analysts are concerned that the platform will face more intense competition from AI-enabled platforms. The market is generally worried that AI technology can bypass intermediaries and directly connect user needs with product purchases, thereby undermining Pinterest's unique value as a visual discovery platform.

The release of this financial report coincided with a week of fragile sentiment on Wall Street. Investors are currently adopting a "sell first, ask questions later" strategy, showing extreme sensitivity to any industry or company that may be disrupted by AI. Previously, a freight company's stock also experienced its largest single-day drop in over six years due to AI concerns, indicating that market panic over AI's impact on traditional business models is spreading