Pinterest posted strong holiday-quarter revenue and gave an upbeat forecast for sales in the current period, a sign that its advertising business continues to grow despite increased competition from much larger rivals in the social networking space. The shares surged more than 27% in late trading.

Revenue for the current period will be $837 million to $852 million, the company said in a statement Thursday, topping the average analyst estimate of $835 million. Profit, excluding some items, will be $155 million to $170 million, higher than the $141 million Wall Street was projecting. The company, whose app lets people search for images and videos and save them to virtual pinboards, also exceeded analysts’ estimates for fourth-quarter sales and user growth.

Pinterest has in recent years made “shoppable” content a key focus, showing users posts that feature products they can easily purchase from within the app. The fourth quarter is historically the biggest of the year for advertisers, who reserve their marketing budgets for the holiday season, when consumers are especially inclined to make discretionary purchases. 

San Francisco-based Pinterest has also been focused on driving more direct-response advertising, meaning ads that yield a specific outcome—such as a website visit or an app download—and are thus more valuable to marketers. It’s also been spending on artificial intelligence to more precisely target ads and recommend photos and images to users. 

Revenue in the fourth quarter increased 18% to $1.15 billion, slightly ahead of the average analyst estimate of $1.14 billion, marking Pinterest’s first-ever quarter to generate $1 billion in sales. 

Monthly active users in the December period totaled 553 million, Pinterest said. Analysts had predicted 547.4 million, according to data compiled by Bloomberg.

—Bloomberg News