Pinterest Inc on Tuesday said advertisers were slowing spending on the image-sharing company due to the COVID-19 pandemic and reported a bigger-than-expected first-quarter loss as costs surged from new user additions, sending its shares down 18% in extended trade.
Advertisers have pulled or cut marketing budgets to rein in costs due to the coronavirus-related uncertainty, impacting social media platforms including Pinterest, Facebook Inc, and Twitter Inc, that rely on digital advertising sales.
Pinterest noted that it saw a sharp deceleration in sales in the middle of March as advertisers responded to changes in demand due to the virus outbreak.
“As off-line stores closed around the world, many advertisers slowed or paused their advertising spending on Pinterest,” Chief Executive Officer Ben Silbermann said on a conference call with analysts.
Pinterest also said revenue in April declined 8%, compared to a year earlier.
The company had withdrawn its full-year outlook last month, citing growing uncertainty due to the impact of the pandemic on the economic environment and its effect on advertiser demand.
“Our cost of revenue has generally grown with users rather than revenue, which in this environment puts some pressure on gross margins,” Pinterest said on Tuesday.
The company, which calls its users “Pinners”, said global monthly active users rose 26% to 367 million during the quarter and it saw record levels of engagement.
“The strong user growth in Q1 reinforces our view that Pinterest has a very bright long-term future. But investors are currently very focused on what the near-term future looks like,” Atlantic Equities analyst James Cordwell said.
Pinterest’s first-quarter revenue, however, jumped 35% to $272 million (218.6 million pounds), and beat estimates of $270.1 million, as coronavirus-led lockdowns forced people to stay indoors and seek engagement and entertainment online.
Use of social media apps has surged recently as the pandemic has forced people to stay at home, and made them increasingly reliant on these apps to stay connected.
Pinterest’s net loss widened to $141.2 million in the first quarter ended March 31 from $41.4 million, a year earlier.
Excluding items, the company reported a loss of 10 cents per share, bigger than analysts’ average estimate of 9 cents, according to IBES data from Refinitiv.
Total costs and expenses surged about 69% to about $418 million.