Pinterest, Inc. Q1 FY2025 Earnings Call

Good afternoon. Thank you for joining today's Pinterest First Quarter 2025 Earnings Call. I will now turn the call over to Andrew Somberg, VP of Investor Relations and Treasury. You may continue.

Good afternoon, and thank you for joining us. Welcome to Pinterest earnings call for the first quarter ended March 31, 2025. My name is Andrew Somberg and I'm Vice President of Investor Relations and Treasury for Pinterest. Joining me on today's call are Bill Ready, Pinterest CEO; and Julia Donnelly, our CFO. This conference call is being webcast and we're also providing a slide presentation to accompany our commentary. Please refer to our Investor Relations website at investor.pinterest.com to find today's presentation, webcast and earnings press release. Some of the statements that we make today regarding our performance, operations, and outlook may be considered forward-looking and such statements involve a number of assumptions, risks, and uncertainties that could cause actual results to differ materially. In addition, our results, trends, and outlook for Q2 2025 and beyond are preliminary and are not an assurance of future performance. We are making these forward-looking statements based on information available to us as of today, and we expressly disclaim any duty or obligation to update them later unless required by law. For more information about assumptions, risks, uncertainties, and other factors that could affect our results, please refer to our most recent Form 10-Q and Form 10-K each filed with the SEC and available on our Investor Relations website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our Investor Relations website. Lastly, all growth rates discussed in today's prepared remarks should be considered year-over-year unless otherwise specified. And now I'll turn the call over to Bill.

Thanks, Andrew. Good afternoon, and thank you for joining our first quarter 2025 earnings call. In Q1, we demonstrated the strength and effectiveness of our long-term strategy and remain laser-focused on delivering value for our users and advertisers. We finished the quarter with another record number of users reaching 570 million MAUs globally, reflecting 10% growth year-over-year. At the same time, we generated Q1 revenue of $855 million, up 16% year-over-year due to the strong performance we are driving for advertisers across the full funnel. We also grew adjusted EBITDA to $172 million as we continue to focus on driving profitable growth while simultaneously investing in high ROI areas to enable us to reach our longer-term opportunity. Before getting into the details of Q1, I'd like to discuss the current macro environment we're operating in. Our business, including our top-line revenue growth, remains healthy. This is an indication that our efforts to build a more engaging and actionable product for our users and a more performant product for our advertisers are working. The strong fundamentals in our business are the result of the strategic priorities we've executed against, taking Pinterest from a platform with declining users and modest revenue growth a few years ago into a secular share taker with a more resilient business than ever before. Today, Pinterest is a shopping destination with roughly 85% of our monthly active users coming directly to our mobile app, which is up nearly 10 points from the middle of 2022. As we've made our platform more actionable and generated growing numbers of clicks and conversions, we've become a vital partner for advertisers across a range of categories seeking to reach our high intent users and drive sales. In turn, we are increasingly accessing always-on performance budgets, which are larger and tend to be more durable. Furthermore, an uncertain macro environment where consumers are more intentional and discerning with their spending presents an opportunity for Pinterest to deliver differentiated utility for our users. Our users are planners and often come to us for their most considered purchases. As such, our ability to leverage AI to personalize our user's experience is a key differentiator and has enabled us to find our best product market fit in years. It also makes us a highly valuable partner to advertisers that are looking for early signals on how consumer trends may be shifting before it shows up in traditional purchasing data. From where I sit today, I'm proud of our consistent execution, the progress we've made to improve the resiliency of our business, and I remain confident that the strategy we've employed will endure for the long term. With that, I'll now shift to our quarterly update on users and engagement where I'll discuss just how we're delivering a differentiated product experience to ultimately drive deeper engagement with our users. A key driver of our success is our intentional effort to build a better, more relevant platform for our users. One that connects them to styles, products, and aesthetics they may not have the words to describe. In fact, according to academic studies, 50% of the human brain is wired for visual processing. The ability for users to explore their interests visually and take action on them is one of our core differentiators and an important reason why users come to our platform in the first place. This is especially relevant for Gen Z, our largest and fastest-growing user cohort who have been raised on an internet of visual content across images and video, and who find utility in the ability to search visually. Over the years, we've been investing to strengthen our visual search and content understanding capabilities to match content from our corpus of billions of pins to a user's taste and style. This means that a search query that may begin as a beach dinner outfit ends with a user finding and purchasing the perfect pair of linen pants along with great accessories from the site or app of a brand that they love, or a brand that Pinterest helped them discover. Throughout 2025, we're doubling down on our visual search capabilities to help users discover and effortlessly shop what inspires them. All powered by our enhanced multimodal AI models, our latest model is trained on both image and text data, deepening its ability to understand a pin by creating a more informative and comprehensive representation of its content. This allows the model to better interpret user input and ultimately provide better recommendations. In fact, our proprietary multimodal AI model that powers visual search on Pinterest is 30% more likely to identify and recommend relevant content from our corpus than leading off-the-shelf models. This advantage stems from the innovations we've made to deploy this model at scale for our unique use case, and from leveraging our extensive signal from the hundreds of billions of user actions that take place on our platform and make up our taste graph, which has grown 75% over the past two years. This ultimately leads to more relevant recommendations and a better experience throughout the user's journey. Leveraging this enhanced multimodal technology, we are unlocking a new level of personalization for our users. Earlier this month, we launched an entirely new user flow on women's fashion pins globally. That upgrades the visual search experience on Pinterest, allowing our users for the first time to search and refine their taste using multimodal image and text-based inputs. This new user experience flow starts with the search image icon in the form of a magnifying glass. Once in this flow, users can select an element of the pin to zoom in on and refine their search further using suggested attributes and filters recommended through our AI models. For example, if a user comes across a lifestyle image of a celebrity wearing a stylish pair of sneakers, they can utilize this new flow to hone in specifically on the shoes to find content with a similar aesthetic, including other products and lifestyle images. Once they do so, they might see descriptor words like streetwear or athleisure alongside terms like graphic pattern or earth tones, which further specify visual or stylistic characteristics of the image, and also allow the user to narrow down their search to the products and images that are most relevant to them. And through this new flow, we also connect users to a carousel of shoppable products from our catalog that match the characteristics of what they're searching for, in turn, allowing them to seamlessly go from inspiration to action. With hundreds of millions of users, one of the largest image corpus in the world, and leading AI capabilities, Pinterest is a leader in visual search. As the landscape continues to evolve, I'm excited about the innovations we're making to our platform to continue offering a differentiated experience for our users. Turning to monetization, all of the efforts we've made to improve our user experience directly tie to our value proposition for advertisers; this is our flywheel. A richer user experience with more actionability drives deeper engagement, providing unique signals to serve relevant ads. Since relevant ads are additive to the user experience on Pinterest, as they allow in-market consumers to connect with products and brands they may like to purchase, we can scale up the amount of ads we're able to show users, ultimately increasing the impressions we're able to monetize. At the same time, we're improving the overall efficiency, relevancy, and performance of each ad served, driving higher click-through and conversion rates by leveraging our AI recommendation models to better understand a user based on past activity and predict the type of ads that might be best suited for them at that given moment. For example, we recently developed an innovative approach to effectively integrate large-scale knowledge graph embeddings into our ads ranking models to drive better performance for advertisers. These knowledge graph embeddings are a way of extracting complex networks of user interactions and ingesting them into our ads ranking models in a format they can better interpret. This drives improved recommendations for users, leading to a 4% uplift in click-through rate on ads shown in our related pin surface. The end result of this is a more shoppable and relevant experience for the user and a more performant ad suite for our advertisers. Our flywheel comes to life for advertisers by offering the ability for them to market across the full funnel, which is synergistic with the way users engage with our product. Advertisers can reach consumers throughout their entire shopping journey from building upper funnel awareness to driving lower funnel conversions. We're seeing that advertisers are using upper funnel objectives in tandem with lower funnel objectives to create full funnel campaigns with even better performance. In fact, those who spend on multiple objectives see nearly 2x higher conversion rates than those who spend on one objective alone. This approach addresses the longer-term industry trend we're seeing of CMOs seeking to tie upper funnel brand dollars back to their revenue growth objectives. Turning to our lower funnel ad offerings, over the last few quarters, we've rolled out and expanded our performance solution set to drive advertiser value while improving the efficiency of advertisers' time and dollars. These efforts continue to yield benefits, with clicks to advertisers up significantly year-on-year, even as we lap the rollout of direct links. They compound as advertisers adopt multiple tools, and they see more benefits accrue. As a result, some of the most sophisticated performance marketers in the world are spending 5% to 10% of their advertising budgets on Pinterest, as they lean into our lower funnel tools and the improved performance in the form of increased clicks and conversions that we're delivering. In Q1, we made further inroads on our lower funnel performance efforts by launching additional bidding functionality into our performance plus suite with ROAS bidding, which went into general availability in March. Previously, our automatic bidding functionality optimized for the maximum number of conversions at the lowest cost. While this remains a core offering for many advertisers, ROAS bidding addresses the need for some advertisers who want to bid based on basket size. For example, a retailer with a large variance in catalog price points may want to bid on conversion value versus conversion volume. While still in the early rollout days, we received positive initial feedback and adoption from advertisers. PacSun, a lifestyle clothing brand popular with Gen Z, saw a three-times higher return on ad spend using ROAS bidding within their catalog campaigns compared to their previous campaigns. We also enhanced Performance Plus creative with image resizing. Image resizing is a scaled way for advertisers to bring their shopping catalog creative, which may be designed or optimized for other platforms, and automatically enhance the ads visuals through resizing and cropping to better fit the Pinterest platform. While still in beta, initial results on shopping ads using image resizing show a 6% improvement in click-through rate compared to those without. Throughout the year, we expect to test and launch more scaled ways to improve advertiser creative within the Performance Plus suite, further automating and optimizing the process of building campaign collateral for advertisers. Overall, we feel great about what we're seeing so far with Performance Plus. As a reminder, Performance Plus brings together existing AI-powered advertiser tools that we've built and launched over multiple years into a simplified campaign setup while also adding new creative and bidding functionality. We brought this new automated AI suite into general availability in Q4 and continue to make meaningful product improvements to bolster our offering and drive efficiency and value to lower funnel advertisers. We consistently see that Performance Plus outperforms traditional campaigns in 80% of AB tests, a testament to the continued value creation we're driving to our advertisers. While we're pleased with our progress, we're still in the early days of driving adoption, and we'll continue to drive advertisers to adopt the full Performance Plus suite of solutions in the quarters and years ahead. Performance Plus is just the latest product in our suite of new lower funnel tools, which are leading to a significant transformation in our business. In our U.S. and Canada region, where we're furthest along in lower funnel shopping, we've been breaking into always-on performance budgets. We're seeing that some of the largest, most sophisticated accounts are increasing their share of wallet with us, and within those accounts, over 85% of their trailing 12-month spend has been in the lower funnel. We are also seeing budget penetration with the next tranche of advertisers, specifically those in the $1 billion to $30 billion sales range. Those advertisers are seeing results from our performance tools and increasing spend, following continued value creation through 2024 from direct links, CAPI adoption, and the initial stages of the Performance Plus rollout. For markets outside of the U.S. and Canada, we are successfully exporting our lower funnel shopping playbook and increasing actionability. Revenue from our catalog shopping ads format was up meaningfully in Q1 year-over-year, with both the Europe and rest of world regions growing shopping ad revenue over three times faster than the overall revenue growth of their respective regions, as we drive deeper budget penetration in these markets and unlock new accounts focused on performance. International revenue is also benefiting from the scaled solutions we've unlocked over the past year, including resellers and other demand partnerships. In Q1, we expanded our reseller efforts to eight additional markets while making strong progress through these reseller partnerships in previously unmonetized or under-monetized countries. Finally, I'll touch on our commitment to improve conversion visibility and measurement. As the industry becomes increasingly focused on data-driven results, the need for privacy-centric measurement remains a priority even as the privacy landscape continues to evolve. In Q1, we drove increased coverage of our privacy-centric measurement tools across our revenue base, through continued adoption of our own solutions like conversions API, clean rooms, and integrations with third-party measurement partners. We also recently entered into strategic partnerships with North Beam and Triple Whale. These partnerships aim to improve the accuracy of Pinterest performance measurement by providing more comprehensive cross-channel measurement to help advertisers understand the true value of their spend on Pinterest. Overall, I'm proud of our team and their continued strong execution on our strategic plan. With that, I'll turn the call over to Julia to share more details about our financial performance.

Thanks, Bill. Good afternoon, everyone. Today, I'll be discussing our first quarter 2025 financial results and provide an update on our preliminary second quarter 2025 outlook. All financial metrics except for revenue will be discussed in non-GAAP terms unless otherwise specified, and all comparisons will be discussed on a year-over-year basis unless otherwise noted. Before I get into our first quarter results, I'll spend a few minutes discussing how we're thinking about our broader business strategy. Over the last few years, we've been executing on a durable long-term strategy focused on our key differentiators as a business, including the user commercial intent on our platform, the ability to create a relevant and actionable experience with ads as useful content, and leveraging our full funnel playbook to drive tangible performance gains for advertisers. We have multiple revenue drivers that have allowed us to take share in a competitive environment across a variety of advertiser verticals. The first is continuing to grow our user base and deepen engagement, bringing users back more frequently through our efforts and actionability and curation. As we've stated many times, relevant ads can be great content for our users and additive to the user experience. And as such, we see room to further grow our ad load as we increase monetizable supply through user commercial intent and more efficient ad delivery. Second, we're continuing to drive improved performance throughout the full funnel from spotlight ads on the awareness side to rapid product velocity, especially in the lower funnel with the launch of direct links, CAPI, and most recently, Performance+, which is in the early days of multi-quarter and multi-year advertiser adoption. Finally, we're finding ways to complement our strong and growing first-party business through new sources of demand, including efficient ways to scale our monetization through partnerships such as resellers, which is starting to drive more meaningful revenue contribution in undermonetized and previously unmonetized regions. At the same time, we continue to be thoughtful about expenses and prioritizing investment in high ROI opportunities, which has allowed us to make considerable progress towards our longer-term margin goals. For example, we continue to focus our AI investments towards initiatives that have a near-term uplift to engagement and monetization such as improving our visual search capability as Bill described earlier as well as improving the technology that underpins our ad-serving efficiency, such as Whole Page Optimization and Performance+. Simultaneously, we're investing in areas which accelerate employee productivity. For example, over 25% of our code is now generated through AI, which is up 10 points since the beginning of the year. Similarly, we've begun testing productivity tools to automate repetitive tasks and standardize content for our sales force, ultimately allowing our sellers to spend more time with clients. Ultimately, as Bill noted upfront, we are confident in the long-term durability of our strategy and the continuation of our steady execution of that strategy through our prudent investment philosophy. Now let's move to our first quarter results. We ended the quarter with 570 million global monthly active users, or MAUs, growing 10% and reaching another record high. We continue to demonstrate user growth across all of our geographic regions. In Q1, our U.S. and Canada region had 102 million MAUs, growing 4%; our Europe region had 148 million MAUs, growing 5%; and in the Rest of World markets, we had 320 million MAUs, growing 14%. Shifting to revenue. In Q1, our global revenue was $855 million, up 16% or up 17% on a constant currency basis. We saw strength across our awareness and conversion objectives. From a vertical perspective, we continue to see broad-based strength in retail. Additionally, emerging verticals led by financial services continue to be a source of strength. As expected, the drag from the food and beverage subsector of CPG lessened slightly to be lapped the full quarter of softer Q1 2024 trends in that category. Turning to our geographical breakout for Q1. In the U.S. and Canada, we generated $663 million in revenue, growing 12%. Strength came from retail and emerging verticals, including financial services. In Europe, revenue was $147 million, growing 24% on a reported basis or 27% on a constant currency basis. Strength in Europe was driven by retail. Revenue from Rest of World was $45 million, growing 49% on a reported basis or 59% on a constant currency basis. In Q1, ad impressions grew 49%, while ad pricing declined 22% year-over-year. As we've discussed for multiple quarters, the sequential acceleration in ad impressions and corresponding decline in ad pricing is primarily driven by international mix shift as last year, we began to serve ads in previously unmonetized or undermonetized international markets, which carry lower ad pricing than our more mature markets. Moving to expenses. In Q1, cost of revenue was $193 million, up 10% year-over-year and up 1% versus Q4 due to increased infrastructure spend related to users and engagement growth. Our non-GAAP operating expense was $494 million, up 12%. The increase was primarily in R&D due to increases in headcount with a smaller increase in sales and marketing. Our robust revenue growth and expense discipline led to another strong quarter of adjusted EBITDA, coming in at $172 million with an adjusted EBITDA margin of 20%, an increase of 300 basis points versus Q1 last year. We also delivered Q1 free cash flow of $356 million. Consistent with prior years, Q1 is seasonally our strongest quarter of free cash flow due to higher Q1 collections following peak Q4 revenue. We ended the quarter with cash, cash equivalents, and marketable securities of $2.6 billion. In Q1, we allocated $175 million towards share repurchase and $94 million on net share settlement of equity awards as part of our ongoing efforts to mitigate dilution. Now I'll discuss our preliminary guidance for the second quarter. Before addressing specifics, I want to acknowledge the current evolving landscape. As Bill noted, our business trends remain healthy overall, and we feel good that the product investments we've made over the last three years are working. While we are not immune to the macro environment, we are confident in our multiple revenue initiatives, the steady ongoing execution of our plans and our ability to compete effectively across a number of scenarios. We expect Q2 revenue to be in the range of $960 million to $980 million, representing 12% to 15% growth year-over-year. Based on the current spot rates, we expect a modest impact on foreign exchange in Q2. Moving down the P&L, we expect Q2 2025 adjusted EBITDA to be in the range of $217 million to $237 million. We anticipate Q2 2025 non-GAAP cost of revenue to grow at a similar rate on a year-over-year basis as we saw in Q1. Within non-GAAP operating expense, our primary area of investment in Q2 will continue to be headcount within R&D, which will support our efforts in AI and other product initiatives as well as investing in sales and marketing, which tends to be seasonally higher in Q2 than in Q1 due to the timing of certain marketing expenses. From where we sit today, we expect to deliver adjusted EBITDA margin expansion year-over-year for the full year 2025, though consistent with our commentary last quarter, the level of expansion will be lower than the outsized expansion we delivered in 2024. In closing, I'm extremely pleased with our team's performance in Q1. We're focused on executing against the levers firmly in our control, like growing and deepening user engagement through a better, more relevant product and driving performance for our advertisers, all while balancing investing in the business and driving long-term profitable growth. With that, I'll hand it over to Bill for some final words.

Thanks, Julia. I want to thank our teams at Pinterest, our advertising partners, and all the people that come to Pinterest to find inspiration and take action. And with that, we can open the call up for questions.

The first question is from Ross Sandler with Barclays.

Great. Bill, just starting with the guidance. 2Q looks pretty solid, all things considered, just a very modest deceleration. We know you have Easter in the second quarter this year, which may help a little bit. But just curious, what you're seeing in the pipeline? And are any of the kind of high-tariff exposed categories in retail and CPG showing any softness thus far? How do you see this playing out throughout the year?

Thanks, Ross. I'll take that one. So first and foremost, as we noted in our prepared remarks, we're seeing strength in our business, and trends remain healthy both in Q1 and the early signals on Q2. Our products are really working well as we leverage AI to drive gains in relevance, personalization, and actionability for users, and drive increasing performance gains for our advertisers across a range of verticals. To your specific question on the Q2 guide, given the situation remains somewhat fluid, our guidance reflects a slightly expanded revenue range. As always, our Q2 revenue outlook factors in both what we are seeing in quarter-to-date trends as well as what we are hearing from our advertising partners directly about their spend expectations for the remainder of the quarter as of today. There have been small pockets of spend that have been impacted by tariffs in recent weeks. For example, like other platforms, we have observed a reduction in spend from Asia-based e-commerce retailers in the U.S. given the change in the de minimis exemption. However, we've also seen a geographic diversification from some of those Asia-based retailers to our European and Rest of World user regions. And that's a theme that has continued to play out over multiple quarters now and continues today. So stepping back, the fundamentals of our business remain strong. Our investments over the past three years have helped us build a more resilient platform, and that's a vital partner to advertisers more so than ever before, and we'll continue to execute on the key strategic initiatives within our control.

The next question is from the line of Eric Sheridan with Goldman Sachs.

Bill, it felt like last quarter and then building momentum this quarter, there was a shift in you framing where the platform and its products were going in terms of things that were inside of your control. So leaving the macro aside for a minute, I know we'll talk a lot about on this call, but are the things in your control in terms of where you want to take the platform and how you want to evolve products, where do you think you are in that journey? And what is the receptivity across the advertising landscape to what you built so far? And how do you think about what might build as we get deeper into the year?

Yes. Thanks, Eric. As we've talked about, going all the way back to our Investor Day, we see multiple ways to win and multiple strategic initiatives that have been playing out to support the direction we're taking the platform. At the core of that, we've made Pinterest a destination for our users, particularly a shopping destination. Pinterest is where Gen Z goes to shop. And you see that reflected not only in the all-time highs in users but also, as we shared in our 10-K, record levels of engagement per user, and that's really a combination of AI becoming a core competency for us, the unique signals on our platform, and the fact that users are here with great commercial intent. So as we've been solving that for our users, we've also been, for our advertisers, opening up format ad platform also driven by AI-enabled tools. And we see it making it so that not only is there better commercial intent and actionability than ever before on Pinterest for our users, as advertisers have better and better tools, to easily take action on that. They're finding that not only can they come take action, Performance+ cuts campaign creation time in half, but also gives them great return on their ad spend and letting them meet users in a unique moment in their commercial journey where they clearly have intent but haven't yet decided what to buy, which is something really special about Pinterest that in the Western world, we're the only platform that has on the surface, in the same app, the user at every stage of the funnel. And we pair that with our unique curation that's giving us really, really unique signals, letting us do really great things with AI with relevant recommendations, as I noted, with our new multilevel model on the call, that's getting to great relevancy for users, making it so that we can give more and more commercial content from our advertisers to them. And so there's really a great flywheel effect between those things. And then as we look at that, as we noted, we focused first on our home market as we were building that out. But as we're moving into international markets, we see that same shopping and lower-funnel playbook really, really working well. So I think not only we continue to grow our user base, deepen engagement, proving that relevant ads could be great content, we're driving improved performance throughout the full funnel, now starting to move that into international markets that are approximately 80% of our users, but only roughly 20% of our revenue. So we're seeing the beginning of that. And we're bringing in new sources of demand as well. So we're making it so that we can meet advertisers where they are, both on measurement and the ability to bring in new demand. And across all of that together, it's really creating a great shopping destination for users, a great performance ads platform for advertisers, and we're starting to take that global, all that underpinned by unique curation, signal, and core competency AI that I think, again, is that durable flywheel that we've been talking about for some time, but we've continued to build upon. And I would say we still have a lot more in front of us than behind us. We're early innings still on so much of this. I think we are well down the path in demonstrating just how unique the value proposition is both for users and advertisers. Hopefully, that helps.

The next question is from Brian Nowak with Morgan Stanley.

I have two questions, please. The first one is about Performance+. You've made significant progress in driving adoption of that product with some of your larger advertisers. Can you provide any insights on the approximate percentage increase in the spending of the same advertisers as you have rolled out that tool? The second question, Bill, is more big-picture. You are seeing very rapid click growth from your advertisers. Last quarter, it was over 90% and even reached 100%. What do you believe is the greatest opportunity to bridge the gap between this rapid click growth you're providing to your advertisers and the actual growth in advertising dollars?

Thank you, Brian. Regarding the uplift from Performance+, I've shared some statistics about the improvements and implementations from various components. It’s essential to understand that this is a suite of products, but we also allow advertisers to choose individual elements. Advertisers who have adopted these tools are experiencing significant performance boosts, and when combined with our new measurement tools, this is resulting in market share and budget increases for us. Although we haven't specified the exact percentage of uplift, we consistently see that around 80% of campaigns using Performance+ outperform traditional campaigns, which gives us confidence in our progress even as we continue to enhance the functionality. We view this as part of a compounding effect that fosters sustainable long-term growth rather than short-term spikes. Our goal is to establish a stronger and more effective advertising platform, capturing more of the steady performance budgets that tend to be more lasting. We are excited about our developments, acknowledging that there’s still more to achieve. The fact that 80% of campaigns on Performance+ are outperforming is quite impressive. Additionally, in our beta tests, we've observed a 20% improvement in cost per action for shopping campaigns. These factors contribute to our strong growth rates compared to the industry, indicating that we have substantial opportunities ahead both in adoption and in shifting dollar shares. Addressing your question about closing the gap between click growth and advertising dollar growth, we see these factors influencing spending changes. We've discussed improving measurement tool implementations frequently, highlighting new partnerships that help advertisers integrate their ad systems better. If advertisers cannot track performance in their measurement systems, it hampers share shifts, so we are focused on privacy-centric measurement strategies. Additionally, we're simplifying campaign creation processes, reducing the time required to create campaigns by 50% or more, which aids advertisers in launching new campaigns easily. Reflecting on our timeline, we introduced Performance+ into general availability late last year and direct links a year earlier. Throughout 2024, we launched direct links which drove clicks and conversions, followed by the implementation of conversion API and measurement tools. Last year, we began improving the ease of campaign creation with Performance+. These elements are the foundation of our growth tools, and they are now coming together effectively. Even with these advancements, we are gaining market share thanks to our unique value proposition. We believe this will continue to support our sustainable business growth going forward. I hope this information is helpful.

The next question is from Shweta Khajuria with Wolfe Research.

We've seen some press reports about you testing with multiple partners. Can you please give us an update on your strategy for third-party demand?

Thank you for the question. First, I want to clarify that our approach to programmatic and third-party advertising remains unchanged. Our primary focus has always been on first-party demand generated by our internal sales team, which drives our business. We see third-party demand as a complement to strengthen our first-party offerings and fill any gaps in our auction. We are continually testing and refining our strategies to identify ideal sources of demand that address these gaps and enhance user engagement. We have consistently mentioned our intent to collaborate with multiple partners, starting with major players like Amazon and Google, while also exploring opportunities with smaller partners that can contribute additional demand to our platform. To facilitate this, we are partnering with Magnite, a leading supply-side platform, to help us aggregate smaller demand sources. While there has been some speculation, we do not have plans to scale with additional supply-side platforms in the near term. We believe that our partnership with Magnite will enhance our ability to gather diverse demand. This is a gradual progression for our business, aligning with our outlined strategy. As with previous initiatives, the integration takes time, and we will plan a thorough go-to-market launch to ensure effective scaling. Therefore, we don’t anticipate an immediate shift in revenue trajectory but rather a gradual enhancement that makes it easier for advertisers to engage with commercial intent on our platform.

The next question is from Ken Gawrelski with Wells Fargo.

Could we discuss the rapid growth in impressions and the related price declines on a per impression basis? I understand this is a global figure, and you've previously mentioned the shift towards international markets and the addition of eight new territories. Can you share what you're observing in UCAN, which is your most mature area? Specifically, what trends are you noticing regarding impressions? Additionally, are you beginning to see any pricing leverage in UCAN based on the price per impression?

Ken, yes, thanks for the question. So we've said for many quarters in a row now the dynamics that we're seeing in terms of global ad impression growth and global pricing decline is primarily driven by international mix shift. As you'll recall, last year, we began to serve ads and monetize previously un-monetized or previously undermonetized international markets. And so naturally, these international markets have lower total addressable market and also have lower cost per impression or eCPMs on average. So this international mix shift puts downward pressure on global pricing, but it's clearly been a positive to net revenue overall. And importantly, you're seeing that show up in the accelerating revenue trends in our Rest of World market for the last several quarters. To your question on sort of UCAN specifically, it is worth noting, if you were to look at kind of UCAN impression growth and pricing alone, it would tell a very different story, and the trends are far less pronounced because the primary driver on a global level really is this mix shift impact due to international growth.

The next question is from John Blackledge with TD Securities.

Great. Just any further color on the broader macro volatility impacting ad spend, particularly with the more brand-oriented advertisers? And is the introduction of Performance+ helping drive and tie together that full-funnel campaign dynamic that you referenced earlier in the call?

Thank you for your question, John. You are correct in highlighting the importance of integrating the full funnel. Pinterest has emphasized this for years, and now that our lower-funnel business is becoming more attractive, we are truly realizing the full funnel's potential. I mentioned in my prepared remarks that advertisers who utilize both upper and lower funnel strategies with us experience double the click-through rate. Effective CMOs understand that the decision-making process extends beyond the last few seconds before a click, which often tends to be the most quantifiable moment. They recognize the need to tell a more comprehensive story to distinguish their brand and connect with customers, even though that aspect isn't easily measurable. By combining upper, middle, and lower funnel capabilities in one platform and user experience, we can effectively integrate these elements for our users and advertisers. Users enjoy a smooth shopping journey from initial inspiration to click and conversion, which aligns with your question about how we're realizing that full funnel. In times of uncertainty, CMOs often recall past periods when instructed by CFOs to tighten their spending. Inevitably, they shift focus to lower-funnel activities, but this can leave them feeling they've missed out on brand storytelling, which is crucial for connecting with customers leading up to that last click. With our full funnel approach, we are providing a solution where they can engage in both upper and lower funnel activities. This allows a CMO to demonstrate to their CFO that when they implement upper funnel strategies alongside lower funnel on Pinterest, their click-through rates are doubled. Thus, the CMO can effectively share their brand story while simultaneously driving lower-funnel actions on our platform. We believe this offering is highly compelling and illustrates our commitment to building solutions that are sustainable over the long term, especially in a time of uncertainty.

The next question is from Ron Josey with Citigroup.

Great. Maybe another one or two, please. The first question is about advertising. Bill and Julia, we've discussed the strength in emerging verticals for several quarters now, stemming from Analyst Day and before, specifically mentioning financial services. I’d like to learn more about these additional verticals where Pinterest is finding success, including some use cases and why Pinterest is an attractive option for these advertisers, particularly with its focus on retail and commerce. Additionally, Julia, you noted that 25% of code is generated by AI, which is an increase of 10 points this quarter. I would appreciate your insights on how this benefits your product in terms of product velocity, time to market, and cost savings as well.

Thanks, Ron. I'll start with the emerging verticals. We've identified financial services as one of the categories experiencing strong growth for several quarters. Other sectors we've highlighted include technology, telecom, and entertainment, particularly streaming services. We have significant growth opportunities in these areas. Pinterest attracts users during important life events, such as starting a family or buying a car, times when they often look for new financial services like insurance or credit cards. This positions Pinterest as an ideal platform for advertisers aiming to reach consumers during these pivotal moments. Advertisers are also interested in understanding consumer trends and spending habits, which helps them tailor their content and messaging, especially for Gen Z users who might be choosing their first insurance or credit card providers. In conclusion, we see strength in these sectors and believe there’s a lasting alignment for these advertisers on our platform, as evidenced by their increasing engagement. Regarding your second question about the 25% of code generated by AI and approved by human review—an increase of 10 points from the previous quarter—we’re very pleased with the progress. We have consistently emphasized that AI is a critical component of our operations, enhancing user engagement and powering new visual search features. We're also using AI internally to boost engineering efficiency, which has notably improved over the past year. This illustrates our focus on both employee productivity and strategic investments in high-return opportunities.

The next question is from Rich Greenfield with LightShed Partners.

I was listening to a D2C marketing exec at Kitch on the Chew on this podcast recently. And the woman was talking about ROAS across various digital platforms. And she gave some specific commentary around Pinterest from her experience and relationships in the business. And one of the things she sort of said was that it's a long game because, when you talk about ROAS on Pinterest, it's a long game because consumers pin things and then they come back, and they do buy them, but they buy them later. I was wondering how you react to that comment from a marketer and how some of the changes you've been making to the product to make it easier to shop and more visible from a shopping standpoint, how that narrative may be changing or whether you disagree with it entirely. But I just would be curious how you react to it.

Thank you for the question, Rich. I would say that commentary has some truth to it. We definitely see consumers turn to Pinterest when they have an initial idea or intent but haven't finalized their purchase. This moment is crucial for advertisers. In the past, Pinterest had this advantage but was lacking in conversions. Now, we are successfully driving clicks and conversions, as I have mentioned. Some advertisers may not have recent visibility into this or may not be using all of our tools, which explains the gap between the growth in clicks and conversions and our revenue growth. Users are now actively clicking and buying on our platform in addition to planning ahead. We are focused on building a full funnel experience, but we are still in the process of getting our advertisers to adopt our offerings. The most advanced advertisers have quickly integrated with us through APIs, recognizing the opportunities we provide. We are also starting to engage advertisers in the $1 billion to $30 billion sales range with our Performance+ solutions, making it easier for them to use our tools. Additionally, we uniquely capture what users plan to do prior to making purchases, giving us insights into consumer trends before they appear in third-party purchasing data. This advantage positions us as a valuable partner for advertisers who can adapt quickly to changing consumer preferences. We are continuing to develop our capabilities to make it easier for all advertisers to access these tools. We are making progress, but there is still much work to do. I hope that clarifies things.

The next question is from Doug Anmuth with JPMorgan.

I just want to ask about capital allocation. You repurchased about $175 million of stock in 1Q and I think have $1.7 billion authorized. Can you just talk about how you're thinking about capital allocation strategy currently in light of valuation, but then also the current macro backdrop as well?

Thanks, Doug. Yes. So we noted in Q1, we did buy back $175 million of shares, as you called out. In addition, we also utilized $94 million in net share settlement of equity awards. So these 2 actions together combined led to a 2.2% decline in year-over-year fully diluted share count. So we're clearly more than offsetting dilution in a meaningful way here. We do have $1.7 billion remaining under our share repurchase authorization. And we have the discretion to determine the timing and amounts of any buybacks under that program, and we will use that discretion thoughtfully over a multiyear period, particularly when the stock is trading at an attractive valuation level. Our overall capital allocation framework hasn't changed from what we laid out at our Investor Day in late 2023. We have lots of potential uses for our cash, stock buybacks, certainly being one of them that you've seen us use here multiple times to mitigate dilution. We're always looking at ways to optimize our balance sheet, preserving flexibility for opportunistic and disciplined M&A, and obviously, first and foremost, investing in our product and technology innovation, as you've seen us do for many quarters now. So that overall capital allocation philosophy remains consistent with what we laid out at Investor Day.

Our final question on today's call will be from Justin Patterson with KeyCorp.

Great. Bill, you've had great engagement gains over the past 2 years, but we're also now in a world where there's more uncertainty on how AI is impacting search. As a business that's at the intersection of search and social, could you expand a little bit more on how visual search and other product initiatives can keep that engagement going?

Thank you for the question. We believe we occupy a unique position at the intersection of social, search, and commerce. Since joining the company, I've shared extensively about the curation signal at Pinterest, which provides us with a distinctive advantage in utilizing AI. I have always viewed AI as a fundamental building block, similar to cloud computing, that thrives on feedback loops. Pinterest has a unique feedback loop that I believe is unmatched in the Western market: users curate their purchases visually before making them. This creates a rich signal for us. When I mentioned that our multimodal model, which supports our visual search, is 30% more likely to recommend relevant content than leading off-the-shelf models, it's a testament to our expertise in AI and the outstanding AI engineers at Pinterest, as well as the value of the curation signal. There is a larger conversation about extensive general-purpose models contrasted with more specialized models that can address specific use cases more effectively. Regarding competition, search has been fragmenting and federating for some time now. While there are still strong players in general-purpose search, there has been significant growth among those targeting specific niches. Pinterest's focus on visual content, commercial intent, and unique curation provides a user experience that is not available elsewhere. Approximately 85% of our users access our mobile app directly, all of whom are signed-in users. This gives us a wealth of history, intent, and rich signals that we can leverage to enhance our offerings compared to general-purpose experiences. Despite the prevalent innovations in the industry, I want to assure you that we continue to achieve all-time highs in user numbers and engagement, as reflected in our 10-K report. This growth is indicative of the unique curation behavior of our users, enabling us to utilize AI in ways that off-the-shelf models simply cannot replicate.

Thank you. That concludes our Q&A session. I'll hand the call back over to Bill Ready, CEO, for closing remarks.

Thanks again to all of you for joining the call and for your questions. We look forward to keeping this dialogue going, and we hope you enjoy the rest of your day.

That concludes today's call. Thank you for your participation. You may now disconnect your lines.