Pinterest (PINS, Financial), unlike tech giants Alphabet (GOOG, Financial) and Meta Platforms (META, Financial), has been an underdog in the digital advertising space. As GOOG and META reported strong Q4 advertising results, PINS was often overlooked. However, PINS has surprised investors with a significant post-earnings rally, despite its previous flat performance since META's Q4 report on January 29.

In 2024, PINS shares fell nearly 20%, contrasting with META and GOOG, which rose 70% and 36%, respectively. Despite this, PINS focused on AI enhancements and new products like Performance+, which have started to yield positive outcomes, as seen in its Q4 results and optimistic future outlook.

• PINS missed its EPS target in Q4, ending a streak of nine consecutive beats, but its adjusted EBITDA climbed 28% year-over-year to $470.9 million, with margins expanding by 320 basis points to 41%. Further margin growth is expected in 2025, though not as significant as in 2024.
• Cost management and revenue growth, driven by increased Monthly Active Users (MAUs) and Average Revenue Per User (ARPU), boosted adjusted EBITDA. Q4 expenses rose 10%, while revenue grew nearly 18%, reflecting a strong return on R&D and workforce investments. MAUs grew 11% to 553 million, a company record.
• Compared to META and GOOG, PINS' capital expenditure is modest. In Q4, META and GOOG spent over $14 billion, while PINS invested about $3.8 billion in assets and technology. PINS' AI investments are proving effective, with AI-powered optimization enhancing ad relevance and conversion rates.
• Performance+, which combines automation and AI for ad campaign efficiency, is gaining traction. PINS plans to enhance this product in 2025, offering advertisers more creative control with features like automated cropping and logo overlays.

PINS' strong Q4 performance and positive Q2 revenue guidance have captured investor interest, positioning the company alongside META and GOOG in the AI-driven digital advertising arena.