Twitter Earnings Beat Estimates, Stock Drops on Lack of User Growth in Latest Quarter

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Shares fell sharply as investors reacted to the flat average monthly user data.

Twitter on Thursday reported lower second-quarter revenue and flat monthly active usage, but beat expectations on earnings.

The social media giant posted earnings per share of 8 cents, compared with a Wall Street consensus estimate of 5 cents, which excludes stock-based compensation and other one-time items. Including those factors, Twitter posted a loss for the quarter of $116 million, compared to a loss of $107 million last year.

Second-quarter revenue was $574 million, down 5 percent from last year, but beating an analyst expectation of $537 million. Advertising revenue fell 8 percent to $489 million, against $535 million in the same quarter last year.

With the number of people on Twitter always a concern, Twitter recorded 328 million monthly active users during the latest quarter, up 5 percent from the year-ago levels, but unchanged from the 328 million reported for the first quarter. Daily active usage was up 12 percent year-over-year, the company reported.

Twitter shares were down nearly 9 percent to $17.97 in pre-market trading as investors reacted to the flat user data. Analysts had expected 332.5 million average monthly active users for the latest quarter.

The collapse in the company's share price continued after the market opened, with Twitter stock trading down 11 percent to $17.45 during mid-morning trading on the New York Stock Exchange as investors digested the morning earnings release.

"While we still have a lot of work to do for revenue growth to get it to track audience growth, the improvements in revenue growth reflect the progress executing against our top revenue generating products in the second quarter as well as strengthening business fundamentals," Twitter COO and CFO Anthony Noto told investors during an analyst call.

Noto during the morning call touted efforts to continue driving engagement with a focus on daily usage. "Product contributions that we're making to the platform are contributing to audience growth," he said, while adding that audience growth is expected to continue in future quarters. 

Noto also put a focus during the analyst call on the platform's live content, in part to differentiate Twitter from social media rivals like Facebook. "We want to serve under-served audiences... with the goal being delivering to passionate Twitter users what they want," Noto said.

The company recently unveiled a broad slate of original programming deals designed to help turn Twitter into a hub for live television. Twitter has struck deals with producer Ben Silverman, WNBA, Derek Jeter's The Players' Tribune, BuzzFeed News and Live Nation, all designed to bring a schedule of weekly and daily programming to the Twitter feed.

During the call, Twitter CEO Jack Dorsey underlined how the company's programming strategy was making Twitter the go-to place for its users each day. "Twitter is what's happening in the world," he told analysts.

In the face of revenue headwinds, Twitter is continuing to realign its products and streamline its cost structure for greater efficiency. "We continue to invest in revenue products and services that leverage Twitter's unique value proposition and are delivering more value to advertisers than ever, with double-digit growth in daily active usage, improvements in ad relevance and better pricing," Noto said in a statement.

July 27, 9 a.m. Updated with comments by Twitter CEO Jack Dorsey and COO and CFO Anthony Noto made during an analyst call.

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