Twitter Inc. cited the economy and other factors after Snap Inc. delivered a sobering warning about the condition of the advertising market and as it too had disappointing earnings for the most recent quarter. With its most recent results, Twitter TWTR, 0.73 percent missed sales targets while swinging to a loss. In early trade, its shares were down 0.5%.
The social media business published earnings on Friday in a more somber manner owing to its merger dispute with Tesla Inc. TSLA, 0.54 percent Chief Executive Elon Musk. Twitter avoided the customary earnings call in favor of a very straightforward announcement, as it did the quarter before. Twitter reported $1.18 billion in revenue for the most recent quarter, almost unchanged from the $1.19 billion it reported a year earlier.
However, experts polled by FactSet had expected $1.32 billion. The results, according to the business, were affected by “headwinds in the advertising sector due to the macro environment as well as uncertainties relating to the proposed purchase of Twitter by an affiliate of Elon Musk.” Twitter did not go into specifics of how the Musk incident impacted its company in terms of revenue.
In contrast to the year-ago quarter, when the business reported net profits of $66 million, or 8 cents per share, the current quarter saw a net loss of $270 million, or 35 cents per share. Twitter said that in the second quarter, the company spent roughly $19 million on severance expenditures and nearly $33 million on costs associated with the Musk acquisition agreement.
The firm reported an 8-cent loss per share on an adjusted basis. A year ago, it reported adjusted profits per share of 20 cents. For the most recent quarter, the FactSet average was for adjusted EPS of 14 cents. According to Baird analyst Colin Sebastian, the disappointing financial results were “not a significant surprise,” in part because of previous Musk comments and the “well-documented decline in wider ad expenditure across the quarter.”
Analysts had anticipated 238.1 million daily active users on Twitter, but the company announced 237.8 million. Overall, according to Wedbush analyst Dan Ives, “the [user] metrics are better than expected and holding up quite strong in this climate.” The outcomes follow Snap’s SNAP, -38.73% Thursday afternoon disclosure of second-quarter revenue that fell short of projections. Snap mentioned “increasing competition for advertising expenditures that are currently rising more slowly” in its shareholder letter.
Ives said that Twitter’s report wasn’t as dismal in comparison to Snap’s “horror” performance since it demonstrated that “digital ad spending is not dropping off a cliff as anticipated, which is a plus for others in the industry.” However, Michael Nathanson of MoffettNathanson was less optimistic about Twitter’s posture.
Given its emphasis on brand expenditure, which is less robust than performance marketing, particularly in times of economic downturn, we feel Twitter is especially vulnerable in the current macro context, the author said. Additionally, Twitter is a digital platform where advertisers may toggle spending in real-time, so their ad revenues are probably going to suffer first before those of traditional brand channels like linear TV.
A similar idea was emphasized by Baird’s Sebastian, who said that organizations looking to decrease costs often start by reducing ad expenditure. This has a more immediate effect on digital advertising than traditional formats, but it also implies that recovery may and will happen more quickly, the author stated.
Over the last three months, Twitter shares have decreased by around 19% in a turbulent time that saw Musk sign a $44 billion contract to acquire the social media platform before announcing his intention to cancel the agreement. Musk said that Twitter understates the frequency of bot accounts on the network and obstructed his attempts to determine the exact number. Twitter wants to continue with the previous agreement. As a result of the judge’s decision to grant Twitter’s request for a speedy autumn trial, that case will now be heard in court in October.