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After Meta Platforms (META), Alphabet (GOOG), and Snap (SNAP) delivered better-than-expected quarterly results, the bar was reset a little higher heading into Pinterests' (PINS) Q3 earnings report, as reflected in the stock's near 7% gain over the past week. While PINS did beat EPS expectations for the ninth quarter in a row, revenue was merely in line with the consensus estimate and its Q4 revenue guidance also failed to impress investors who were looking for more.

• At the midpoint of that Q4 outlook, which calls for revenue of $1.125-$1.145 bln, PINS' topline growth would continue its downward trend, sliding from nearly 23% in 1Q24, to 21% in Q2, 18% this quarter, and finally, to 16% next quarter. 
• As PINS' growth is slowing, the company is ramping up its AI investments in order to keep pace with larger competitors like META and SNAP. Marketers are seeking better ROIs through more targeted ads, and META has become a preferred destination in that regard due to its AI capabilities that identify and match likely buyers on its platform with advertisers' products. PINS has lost some ground and its increasing spending in order to improve its competitiveness.
• In Q3, total costs and expenses jumped by about 18% yr/yr to $904.3 mln, which was well above analysts' expectations. For Q4, PINS is targeting operating expenses of $495-$510 mln, representing a yr/yr increase of 11-14%. 
• AI is already playing a major role on PINS' platform. In fact, the company's AI models currently generate over 400 mln predictions per second, ranking what its users might engage with each time they are on the platform. Furthermore, AI is enabling the platform to draw on more relevant ads during high purchase intent time periods, driving ad engagement higher. These enhancements are resonating with advertisers, including larger advertisers that have typically allocated their marketing dollars on larger platforms.
• During the earnings call, PINS noted that with some of its large advertisers, it has now reached over 5% of their total ad budgets, or 10% of their digital ad budgets. With the recent launch of Performance+, which bundles automation and AI features to simplify ad campaign creation, PINS believes that it will attain an even larger percentage of large advertisers' ad spend.

The main takeaway is that PINS' slowing revenue growth is stoking fears that it's falling behind larger rivals like META, GOOG, SNAP. Compared to META, the company's war chest for spending on AI pales in comparison, making it very challenging to keep pace. PINS has done well to make some meaningful inroads with larger advertisers as it bolsters its AI capabilities, but it may become increasing difficult for the company to generate strong earnings growth as it ramps up spending.