Pinterest (PINS): Beat On Every Line - And Stock Comp Bigger Than All The Profit

Pinterest, Inc. (PINS) Q2 2026 — Q2 2026, quarter ended June 30, 2026. Revenue $1,179.7M, +18.2%, vs ~$1,148M consensus (+17% constant currency). Non-GAAP EPS $0.43 vs $0.36 expected. Adjusted EBITDA $311.3M vs $269.6M expected. GAAP net LOSS $46.7M; GAAP EPS -$0.08. Share-based comp $319.7M = 27.1% of revenue - larger than adjusted EBITDA. MAUs 640M, +11%. Q3 guide $1,190-1,210M (13-15%). PINS closed $25.58 on Aug 4, then fell ~9% after hours to ~$23.28. Pinterest beat on revenue, on adjusted EPS and on adjusted EBITDA - and the stock fell about 9% after hours. The reason is one line in the footnotes: Pinterest expensed $319.7M of stock compensation in the quarter, which is MORE than the $311.3M of adjusted EBITDA that add-back creates. That is 27.1% of revenue, versus 22.8% a year ago. Meta runs about 11%. THE CALL: HOLD (3/5, A REAL ACCELERATION THAT SHAREHOLDERS DO NOT OWN YET) — base-case value ~$24.0 vs ~$25.58 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$24 vs the $25.58 close (-6%) and ~$23.28 after hours (+3%). DCF on free cash flow AFTER charging every dollar of stock compensation, share count held flat. Base: revenue +13% fading to +9%, adjusted EBITDA margin 28% to 35%, SBC falling from 27% of revenue to 14% by 2031; economic FCF $275M in 2027 rising to $1,265M in 2031. At 10/11/12%: bear $8/$7/$6, base $27/$24/$21, bull $45/$39/$33. Reverse-DCF: $25.58 needs ~$1.4B of post-SBC free cash flow in 2031, a 17% margin, against approximately ZERO this year. Hold SBC at today's 27.1% of revenue and the whole equity is worth about $7. - THE BEAT IS REAL. Revenue $1,179.7M, +18.2%, vs ~$1,148M expected - the fastest growth in three years. Non-GAAP EPS $0.43 vs $0.36 (a 19% beat) and $0.33 a year ago. Adjusted EBITDA $311.3M vs $269.6M expected, a 26.4% margin. Free cash flow $269.9M. MAUs a record 640M, +11%, an 11th straight double-digit quarter. Q3 adjusted EBITDA guided $335-355M, above the Street. But on GAAP: a net LOSS of $46.7M against a $38.8M profit last year, EPS -$0.08 vs +$0.06, and a $55.2M operating loss. The gap between the GAAP loss and the $249.5M non-GAAP profit is $296M - 25% of revenue in add-backs. - STOCK COMP IS LARGER THAN THE PROFIT IT CREATES. Share-based compensation was $319.7M vs $227.2M, up 40.7% against 18% revenue growth - 27.1% of revenue vs 22.8%. Adjusted EBITDA was $311.3M. Revenue grew $181.4M; SBC grew $92.5M, so 51% of every incremental dollar went out as stock. R&D stock comp alone was $212.5M, +45.6%. The 10-Q discloses a further $1,443.8M granted and not yet expensed over 2.1 years - roughly $240,000 per employee per year across 5,265 staff, in stock alone. - SEVEN OF THE TEN CENTS CAME FROM THE BUYBACK. Adjusted net income grew 9.3% ($249.5M vs $228.3M). Adjusted EPS grew 30% ($0.43 vs $0.33). The entire difference is the diluted share count: 689.8M to 577.6M, -16.3%. Hold shares flat and that same profit is $0.36, not $0.43. Funding: on March 5 Pinterest sold $1.0B of 1.75% convertible notes due 2031 to Elliott Associates and Elliott International - disclosed as a RELATED PARTY - converting at $22.72, with $99.2M of capped calls pushing dilution to $30.59. H1 uses: $2,024.9M of buybacks, $180.5M of RSU tax withholding, $447.0M for tvScientific. Cash and securities fell $2,467M to $1,275M; equity fell $4,745M to $2,894M. - HOW MUCH OF THE 18% WAS REAL, AND THE GEOGRAPHY. Constant currency growth was 17%, not 18 - FX added $10.4M. Management flagged the Prime Day shift (~0.5pt) and World Cup spend (~1pt), both reversing in Q3. Underlying is nearer 15.5%, and Q3 is guided to 13-15%. By region: U.S. and Canada revenue $880M (+18%) at $8.30 ARPU on 106M users; Europe $213M (+12%) at $1.35; Rest of World $87M (+38%) at $0.23 on 377M users. So 59% of the audience produces 7% of the revenue and 17% produces 75%. Market cap computed ourselves: 492,198,008 Class A + 74,115,019 Class B = 566,313,027 shares (10-Q cover, Jul 29) x $25.58 = $14.5B - screens still print ~$17B off December's count. What to watch: Changes our mind UP: stock comp falling as a share of revenue two quarters running while growth holds in the low teens, or Rest-of-World ARPU lifting off $0.23. Confirms the bear: SBC above 26% while growth slips under 13%. We would buy at $17-$19 - where Pinterest itself bought $2.0B of stock at $18.17. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.