/Twitter plunges after missing Wall Streets revenue and profit forecasts

Twitter plunges after missing Wall Streets revenue and profit forecasts

jack dorseyKimberly White/Getty Images

  • Twitter’s shares plunged as much as 20% in pre-market trading after its third-quarter revenues and earnings missed Wall Street’s forecasts. 
  • The social media giant revealed a 9% rise in revenue to $824 million and a sharp drop in adjusted earnings per share to $0.05, as product bugs and weaker advertising demand weighed on its business.
  • Daily active users rose 17% to 145 million.
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Twitter shares plunged as much as 20% in pre-market trading as the social media giant’s third-quarter earnings missed Wall Street’s revenue and profit expectations. It also warned product issues and weaker advertising demand are weighing on its business.

Twitter’s revenue rose 9% to $824 million as product issues and greater-than-expected advertising seasonality in July and August outweighed strong trading in the US in September. The slower sales growth, combined with a 17% rise in costs, fueled a 52% drop in operating income to $44.1 million.

More positively, Twitter’s monetizable average daily users — authenticated users who can be shown adverts — rose 17% to 145 million. The company credited the growth to product improvements, organic growth, and marketing.

However, Twitter revealed bugs affected its legacy mobile application promotion (MAP) product, hampering its ability to target adverts and share data with measurement and advertising partners. It also found some personalization and data settings weren’t working correctly.

It estimates those issues slashed revenue growth by 3 percentage points or more in the period, and warned they’re likely to “weigh on the overall performance of our advertising business in the near term.” Indeed, it expects them to wipe 4 percentage points or more off its year-over-year revenue growth in the fourth quarter.

Here are the key numbers from Twitter’s third-quarter financials:

  • Revenue: Up 9% from Q3 2018 to $824 million. Analysts polled by FactSet had expected an average of $873.9 million.
  • Earnings per share: Adjusted EPS of $0.05, down from $0.14 last year. Analysts had expected $0.20 per share.
  • Average daily users: 145 million, up 17% from last year. Twitter added 6 million more daily users, beating analysts’ expectation of 3 million.
  • Q4 guidance: Revenue between $940 million and $1.01 billion, below analysts’ expectation of $1.06 billion.

Twitter’s advertising revenue rose 8% to $702 million, as advertising sales in the US grew 11% — a sharp drop from their 32% growth in the third quarter of 2018. International ad sales rose 5% as the legacy MAP bugs and advertising seasonality took a toll. The company blamed weaker advertising demand during the summer on a “relatively lighter slate of big events and launches in July and August compared to 2018.” 

Total ad engagement soared 23% year on year, but Twitter’s cost per engagement dropped 12% as advertisers paid less to reach its audience.

“We drove strong growth in monetizable DAU (mDAU), up 17% year-over-year, driven by ongoing product improvements,” Twitter CEO Jack Dorsey said in the earnings release.

“We also continue to make progress on health, improving our ability to proactively identify and remove abusive content, with more than 50% of the Tweets removed for abusive content in Q3 taken down without a bystander or first person report.”

This story is being updated…

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