Twitter’s ad woes weigh on revenues
Added more users in latest quarter, but technical bugs hurt advertising business results
Twitter Inc. added more users in the latest quarter but said its pace of revenue growth slowed sharply because of technical bugs that hurt its advertising business.
Shares plunged roughly 20% in premarket trading Thursday as revenue and profit in the third quarter fell short of Wall Street expectations and the company’s outlook for the current quarter trailed analysts’ forecasts.
The social-media company said the number of people who use its platform daily increased by 6 million from the second quarter to 145 million. The improvement follows changes designed to serve users more relevant content, enabling them to follow topics of interest. Analysts polled by FactSet had estimated Twitter would add roughly 3 million daily users.
Revenue rose 9% from a year ago to $824 million (U.S.), marking the small- est annual increase since late 2017 and below the $873.9 million that analysts polled by FactSet were expecting. Twitter blamed software malfunctions associated with its ability to target ads and share user data with advertisers.
Third-quarter profit totaled $37 million, or 5 cents a share, down from $789.2 million, or $1.02 a share, in the prior-year period; the 2018 third quarter included a large tax benefit.
Excluding certain items such as stockbased compensation, profit was 14 cents a share, down from 21 cents a share a year earlier. Analysts had expected an adjusted profit of 20 cents a share.
“There’s nothing in the quarter that changes our strategy or the long-term fundamentals of Twitter,” said Ned Segal, Twitter’s chief financial officer. “We’re continuing to invest to drive audience growth and deliver for advertisers.”
The challenges with Twitter’s advertising business was a surprise to most analysts, said Cascend analyst Eric Ross.
“No one was talking about this,” he said. “The results were much worse from a revenue-peruser standpoint than we were expecting. This is shock- ing given the growth in daily active us- ers.”
Shares of Twitter have gained 35% this year through Wednesday’s close compared with a 20% gain for the S&P 500.
Earlier this week, Snap Inc. said the number of daily Snapchat users rose by seven million in the third quarter to 210 million, though that growth was smaller than the 13 million users it gained in the second quarter.
Facebook Inc. is slated to release its quarterly report next week. In the second quarter, the company counted 1.59 billion people who used its “blue” app, its oldest and largest product.
For the fourth quarter, Twitter said it expects revenue of between $940 million and $1.01 billion, compared with $909 million in the final quarter of 2018.
The company said it anticipates the issues that plagued the ad business in the July through September period to continue in the current quarter. Analysts polled by FactSet were expecting $1.05 billion in revenue.