Twitter Added 8.8 Million New Users in Q2 Amid Elon Musk Takeover Battle, Now at 237.8 Million DAUs

Twitter reported second-quarter revenue of $1.18 billion (nearly Rs. 9,400 crore) amid fierce competition from Apple and Tiktok.

By Kurt Wagner, Bloomberg | Updated: 22 July 2022 18:13 IST

Twitter was expected to post revenue of $1.32 billion (roughly Rs. 10,500 crore)

Highlights

Twitter posted a surprise fall in revenue
Twitter is locked in a legal battle with Elon Musk
It reported second-quarter revenue of $1.19 billion a year earlier

Twitter reported disappointing second-quarter sales on Friday, another blow to a company that is already fighting a high-profile legal battle with Elon Musk over the fate of the social network.

Revenue fell 1 percent in the quarter from a year earlier, its first annual decline since the middle of the pandemic in 2020. Sales totaled $1.18 billion (nearly Rs. 9,400 crore) in the quarter, which fell short of the $1.32 billion (nearly Rs. 10,500 crore) analysts estimated. The company said “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter” were factors in the disappointing results.

Twitter added 8.8 million new users during the quarter, in line with analysts' estimates.

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It's unclear how much Friday's earnings report truly means to investors while the company's fate remains in limbo. Until two weeks ago, Twitter was set to sell the company to Musk for $54.20 (nearly Rs. 4,300) per share, making its financial reports little more than a formality as it awaited the deal to close.

But Musk tried to back out of the deal on July 8, claiming Twitter hasn't been forthcoming with information on the number of fake accounts running rampant on the site. Twitter reiterated in its earnings release on Friday that it believes false or spam accounts make up less than 5 percent of its total user base, a claim that Musk has repeatedly questioned.

Both sides are preparing for a trial, expected in October, during which Twitter will ask a judge to force the Tesla chief executive officer to honour his purchase agreement to buy the company for roughly $44 billion (nearly Rs. 3,51,300 crore).

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“This makes the investment case for Twitter hard to make at this point,” wrote Truist Securities analyst Youssef Squali after Musk's announcement. Truist estimated that the shares could trade “in the high $20s (nearly Rs. 1,600)” if the deal falls through.

If the deal does fall through, Twitter's business could be in trouble. The company previously set a goal to reach 315 million daily users by the end of 2023 and boost revenue to $7.5 billion (nearly Rs. 59,900 crore) annually by the same period. Currently, Twitter isn't on track to meet the user goal. It reported 237.8 million average monetizable daily active users in the second quarter.

Like many of its social media peers, Twitter is also facing a major slowdown in advertiser spending and increasing competition from TikTok for viewers. Snap foreshadowed the difficulties in the industry on Thursday when it reported disappointing sales, citing advertisers slashing budgets more than expected due to the global economic uncertainty, but also increased competition for dwindling marketing dollars.

Twitter shares, which fell initially after Snap's results, were little changed at $39.68 (nearly Rs. 3,200) Friday morning in New York. They are down almost 9 percent this year.

Twitter's net loss was $270 million (nearly Rs. 2,200 crore) in the quarter, or a loss of 35 cents a share. That compares with net income of $66 million (nearly Rs. 500 crore) and earnings per share of 8 cents in the same period a year earlier.

Twitter isn't holding an analyst call to discuss earnings, and only published a short press release with minimal detail compared with its usual shareholder letter. In the previous quarterly results in April, Twitter withdrew its earlier outlook and said it wouldn't provide forward-looking guidance.

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