Twitter’s earnings tumble amid legal fight with Musk
Report also cites hiring slowdown in lackluster economy, slumping stock price
Twitter is embroiled in a grueling legal fight with Elon Musk as he tries to back out of a $44 billion acquisition of the company. It has slowed its hiring as it grapples with a flagging economy. Its stock price has slumped.
On Friday, Twitter revealed the toll from those challenges. In an earnings report, the company said the uncertainty caused by Musk had hurt its business, alongside macroeconomic troubles. Twitter’s revenue declined for the first time since 2020 as it struggled to be a destination for advertisers and swung to a net loss.
The lackluster earnings report ramps up the blame game that has erupted between Twitter and Musk, who swooped in and exposed the company’s lack of business and financial prospects as he has gone backand-forth over buying the social media service. Musk, who also leads electric carmaker Tesla, had agreed to buy Twitter in April and said he would take it private.
He privately told investors that he could quintuple the company’s revenue by 2028 and expand it to 931 million users that same year.
But as the stock market has teetered, pulling down shares of Tesla — which is his main source of wealth and which lost a third of its value this year — Musk made increasingly barbed comments about Twitter. This month, he moved to terminate the deal. Twitter has since sued him to complete the purchase, and a five-day trial to adjudicate the matter is scheduled for October in Delaware Chancery Court.
“Twitter now has an acquirer who no longer wants it, it has a CEO and a board who want to get rid of it, and an employee base who is caught in the middle,” said Mike Proulx, a research director at Forrester. “None of this is good for Twitter.”
In its earnings statement, Twitter attributed the disappointing results to “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.”
In total, revenue was $1.18 billion for the second quarter, down 1% from a year earlier, a far cry from the 20% growth that it had once predicted for the year. Twitter’s revenue fell 2% between the first and second quarter, which roughly coincides with the periods immediately before and after Musk made his move on the company.
Net loss was $270 million, a major swing downward compared with a profit of $66 million in the same quarter last year, as costs and expenses grew.
There was one bright spot: Twitter said it had 237.8 million daily active users who saw ads, up nearly 17% from a year earlier.
In recent months, Twitter and other social media companies have confronted a gloomy advertising market. Fears about an economic downturn have tamped down ad spending, which social media firms rely on for most of their revenue.
Twitter CEO Parag Agrawal has told employees the company has not lived up to its potential and has cut costs, fired top executives and exhorted employees to ignore Musk’s fireworks in recent months.