|Twitter shares drop 9 percent as it fails to deliver user growth|
- Twitter posted better-than-expected EPS and revenue growth in its second-quarter earnings report.
- The number of monthly average users remained flat from the previous quarter.
- Advertising revenue continues to decrease year-over-year.
Michael Sheetz | @thesheetztweetz
July 27, 2017
Twitter reported a lower-than-expected number of monthly active users in its second-quarter earnings report before the bell Thursday.
Shares of the company dropped 9 percent in pre-market trading, after the company reported 328 million monthly active users, unchanged from the previous quarter.
"You have zero user growth versus Facebook reporting 70 million new users [after the bell Wednesday]," Aegis Capital internet analyst Victor Anthony said on CNBC's " Squawk Box." "It's not a recipe for a stock you want to buy."
Advertising revenue also decreased 8 percent year-over-year, totaling $489 million compared to $535 million in the same quarter last year.
Expectations vs. results
Twitter started the year strong when the company reported 9 million more monthly active users than expected in the first quarter. User growth has been a concern for investors, who see the 328 million active Twitter users as severely lagging behind Facebook's more than 2 billion.
- EPS: 12 cents vs. 5 cents expected, according to Thomson Reuters.
- Revenue: $574 million vs. $536.7 million expected, according to Thomson Reuters.
- Monthly active users: 328 million vs. 329 million expected, according to StreetAccount.
The social network admits it needs to continue to bring its revenue growth in line with its user growth, but Twitter executives remain confident recent efforts are helping to reverse recently declining revenues.
"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," chief operating officer Anthony Noto said on a call with investors.
Twitter launched a less data-intensive version of its service called Twitter Lite on April 6. It can only be accessed via mobile web browser and takes up less than 1 megabyte of storage.
CEO Jack Dorsey said Twitter Lite is an effort to attract users in low-data, remote parts of the world, such as as India, where Twitter found the "app was way too slow to access."
On an earnings call with investors, Dorsey said initial results from Twitter Lite "look really positive" but declined to provide any statistics, warning that it was too early assess the success of the service.
A crackdown on abusive activity is making progress, as Twitter reported it is taking daily action on ten times as many abusive accounts compared to the same time last year. By limiting functionality or suspending accounts, Twitter found abusive users generated 25 percent fewer abuse reports. Mistreatment on the platform has scared off both advertisers and potential buyers, as Salesforce ruled out a bid for Twitter in part from concerns the social platform could not handle online abuse and trolls.
Online advertising is increasingly an issue for Twitter, as other technology companies such as Alphabet and Facebook continue to eat up more digital advertising revenue. Advert engagement grew 95 percent year-over-year in the second quarter, yet ad sales fell 8 percent from the previous year.
Digital trends analysis firm eMarketer projects Twitter's advertising revenue will grow 1.6 percent this year, to $2.28 billion, with 90 percent of that revenue coming from the mobile market. Despite the focus on mobile, eMarketer believes the company's share of global market advertising will shrink to 1.5 percent.
Shares of Twitter remain well below its IPO price of $26.