Arthur J. Villasanta – Fourth Estate Contributor
San Francisco, CA, United States (4E) – Twitter reported better-than-expected earnings and revenue growth in the second quarter despite losing one million active users.
Revenues rose to $574 million as against $536.7 million expected by analysts. Earnings per share (non-GAAP) jumped to $0.12 cents as against $0.05 expected. The company posted a record profit of $100 million.
“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,” said CFO Anthony Noto.
Twitter shares dove as much as 13 percent in midday trading on July 27 after it reported 328 million monthly active users, unchanged from the previous quarter. Its stock closed 20.5 percent lower on Friday after it announced the loss of one million active users. More user loss is predicted.
Twitter does not expect user growth to increase significantly in the remaining months of 2018. User growth is an ongoing worry for investors, who see the 328 million active Twitter users as severely lagging behind Facebook’s more than two billion.
Advertising revenue fell eight percent, amounting to $489 million compared with $535 million year-on-year.
“You have zero user growth versus Facebook reporting 70 million new users (after the bell on July 25),” said Victor Anthony, an Aegis Capital internet analyst. “It’s not a recipe for a stock you want to buy.”
Twitter admits it has a lot of work to do to bring revenue growth in line with user growth. Twitter executives, however, remain confident recent efforts are helping to reverse declining revenues.
On April 6, Twitter launched a less data-intensive version of its service called Twitter Lite that takes up less than one megabyte of storage. This version can only be accessed via a mobile web browser.
CEO Jack Dorsey said Twitter Lite intends to attract users in low-data, remote parts of the world, such as as India, where Twitter found its app was difficult to access.
A crackdown on abusive activity is making progress. Twitter said it’s taking daily action on 10 times as many abusive accounts compared to the same period in 2017. Mistreatment such as online abuse and trolling on the platform has scared away advertisers and potential buyers.
Twitter shares closed at 20.5% at the end of the trading week on July 27. Before this, Twitter stock had risen 79 percent in 2018.
“We see health as a growth factor for us over the long term,” said Dorsey. “We don’t think this work will ever be done — it doesn’t have an endpoint,” he said referring to the ongoing purse of abusive accounts.
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