Twitter tumbles as user growth plateaus
Doubts arise about rebound as net loss widens, sales falls
Twitter failed to attract more monthly users in the second quarter, spooking investors looking for evidence that the company is on a sustainable long-term growth path. The shares tumbled the most in nine months, even as quarterly revenue topped analysts’ projections.
A long-term turnaround depends on Twitter expanding its audience. That number stands at 328 million monthly active users — the same as in the prior quarter, the San Francisco-based company said in a statement Thursday. Revenue fell 4.7 per cent and the company’s net loss also widened, affected by a US$55 million writedown of the value of its investment in SoundCloud, the German music streaming service.
Twitter is still working to prove that it can build a sustainable, growing business. After hitting a plateau with its user base and struggling with a slowdown in sales, the company started narrowing its focus, shuttering businesses and teams that didn’t fit its goal of being a destination for live-event content. With a goal of reaching profitability, Twitter began investing heavily in video, aiming to draw a more mainstream set of users and premium advertising deals. The network now has a promising set of partnerships in its pipeline, but some investors are skeptical that Twitter will ever be much bigger than it is today.
“It’s a niche platform,’’ said Brian Wieser, an analyst at Pivotal Research. “It always was and always will be.’’
Though its monthly audience failed to grow, Twitter said there’s room for optimism because 12 per cent more users are visiting the site on a daily basis than in the same quarter last year. The company declined to disclose a daily active user number or provide further details. But Twitter also said that it doesn’t expect its overall sales growth to improve in the second half, citing “headwinds” related to products it’s de-emphasizing.
The shares fell as much as 14 per cent per cent to US$16.85 — the biggest intraday drop since October; they ended the day at US$16.84, down 14 per cent. They were up 6.3 per cent in the 12 months through Wednesday.
Twitter reported a net loss of US$116.5 million, or 16 cents a share. Revenue dropped to US$573.9 million, though that beat analysts’ average estimate of US$537.2 million as the company drew more money from video advertising and its business selling data to third parties.
In the third quarter, Twitter said it expects adjusted earnings before interest, tax, depreciation and amortization of US$130 million to US$150 million. The average analyst estimate was US$144.1 million.
Twitter’s business troubles contrast with its increased profile in the political world, as U.S. President Donald Trump frequently uses the platform to reach the public in an unfiltered manner. Despite his daily fusillade of tweets, Trump hasn’t helped Twitter’s growth in its home country.
Monthly active users in the U.S., Twitter’s most important advertising market, declined to 68 million from 70 million in the prior quarter. U.S. ad revenue also fell seven per cent to US$335 million as it struggles to compete with Alphabet Inc.’s Google and Facebook Inc., which account for most of the growth in digital advertising.
Chief financial officer Anthony Noto said Twitter doesn’t know why U.S. monthly active users slipped. “We don’t have data that will explain a causal impact” of that shift, he said.