Twitter Inc. reported strong user growth, but experienced persistent impacts of the coronavirus pandemic in its final quarter, as the company navigates through a difficult advertising climate and the consequences of a major security breach.
On Thursday, the San Francisco social media company said its daily user base increased 12% to 186 million in the three months ended June 30 from the previous quarter, a stronger increase than analysts surveyed expected. by FactSet.
Twitter revenue fell 19% in the second quarter from a year earlier to $ 683 million, missing analyst consensus estimate of $ 702 million, according to FactSet. In the previous quarter, Twitter declined to provide revenue or operating revenue forecasts, citing economic uncertainty related to the virus and changing market conditions. For the same reasons, the company did not provide guidance for those metrics in its latest earnings report.
The company lost a loss of $ 1.23 billion, noting that its results were affected by a reversal of a tax benefit of more than $ 1 billion recorded in 2019. Excluding the tax element, Twitter’s loss was more pronounced than analysts had forecast.
“Our number one priority is to make sure our roadmap is robust and moving fast,” Chief Executive Jack Dorsey told analysts in a earnings call. “This quarter is a great example where you saw a lot of work under the hood.”
Twitter recently said in a job posting for a senior software engineer that he was building a subscription platform with a team called Gryphon. In the earnings call, Dorsey said “there is a world where underwriting is complementary,” but that the initiative was in the early stages of exploration. “We have a very high bar for when we ask consumers to pay for aspects of Twitter,” he said.
Global spending on advertising plummeted as the number of coronavirus cases rose earlier this year, hurting companies like Twitter. Some companies also stopped spending for a few weeks after protests sparked by the police murder of the Minneapolis man, George Floyd, Twitter said.
But Twitter said it has seen signs of recovery in the advertising market. In the last three weeks of June, “advertisers started to adapt and we saw things open up a bit,” said Twitter chief financial officer Ned D. Segal.
Twitter shares rose more than 4% on Thursday. The stock has gained 20% so far this year, compared to a modest gain in the S&P 500. “People look to the future and say the worst is over,” said MoffettNathanson analyst Michael Nathanson. “If Twitter can solve this marketing problem, if they can attract more advertisers, they have the traffic to increase revenue.”
Segal said more event planners were able to change their plans by hosting virtual events, and promoting them on Twitter, to replace canceled in-person events during the quarter. He said Twitter also benefited from the expenses of advertisers linked to virtual parties for movie launches and concerts.
Separately, Mr. Segal said that new people continued to be drawn to Twitter to learn about important issues like the coronavirus pandemic and the Black Lives Matter movement. He also credited the changes the company made to its platform, such as people’s ability to follow specific topics.
“As long as the commitment is there and it doesn’t go down, the revenue will come back,” said Global Equities Research analyst Trip Chowdhry.
The messaging platform’s results come about a week after Twitter was hit with a cybersecurity attack that allowed hackers to take over a number of accounts, including those of celebrities, politicians, billionaires, and big business. In a letter to shareholders, Twitter described the problem as disappointing, saying it implemented safeguards to improve the security of its systems and that it was working with law enforcement entities while investigating the matter.
Twitter has said the attack targeted 130 accounts overall. On Wednesday, the company said hackers viewed the direct message inboxes associated with 36 of those accounts and downloaded a personal data file from eight accounts.
“We understand our responsibilities and are committed to earning the trust of all of our shareholders with each of our actions, including how we approach this security issue,” the company said in a letter to shareholders.
Snap Inc., which also relies heavily on advertising, reported Tuesday that revenue growth slowed in the second quarter. The company said advertisers appeared to be spending more in the past few weeks. Results are expected for Facebook Inc. and Alphabet Inc. next week.
Twitter said its operating expenses increased 5% in the second quarter. The company said growth was slower than initially expected after decisions were made, including reducing spending.
Segal said the company expects expenses to grow at least 10% in the current quarter.
Earlier this year, activist hedge fund Elliott Management Corp. acquired a $ 1 billion stake in Twitter and told the company it wanted a full-time CEO, a hit on Mr. Dorsey, who is serving As CEO of Twitter and financial services company Square Inc, Twitter and Elliott agreed to a truce that included a promise to drive growth in its user base and revenue and the appointment of new board members. Twitter has added three new board members in the past 120 days, Segal said.
Write Sarah E. Needleman at [email protected]
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