Twitter Posts Q2 Earnings Miss, Blaming Elon Musk Fiasco and Advertising ‘Headwinds’

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Twitter revenue for the June 2022 quarter came in short of Wall Street estimates — declining 1% — with the company in part blaming Elon Musk’s attempt to back out of his acquisition deal. The social network also swung to a net loss in the period, whereas investors were expecting Twitter to be in the black in Q2.

Q2 revenue totaled $1.18 billion, down 1% year-over-year. That reflected “advertising industry headwinds associated with the macroenvironment” — as well as “uncertainty related to the pending acquisition of Twitter” by Musk, the company said. Twitter costs ballooned 31% in the quarter, leading to a $270 million net loss (or adjusted net loss of 8 cents per share, excluding stock-based compensation expense and other items) compared with net income of $66 million in the year-ago period.

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Twitter’s results come amid its legal battle with Musk, in which Twitter is demanding that the world’s richest person make good on his $44 billion acquisition agreement. A judge in the Delaware Court of Chancery set October for a trial in to hear Twitter’s case against Musk.

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Analysts expected Twitter to post $1.34 billion in revenue and adjusted earnings of 14 cents per share for Q2, according to financial data provider Refinitiv.

Twitter noted that, excluding in-app ad unit MoPub (which it sold in Q4 for $1.05 billion), topline growth was 3%. The company’s ad revenue rose 2% to $1.08 billion in the most recent quarter, up 6% excluding the impact of foreign-exchange rates.

Twitter’s Q2 average monetizable daily active users increased by 8.8 million sequentially, to 237.8 million, up 16.6% year over year. Average U.S. mDAUs were 41.5 million for Q2, up 14.7% versus the year-earlier period.

Twitter’s stock was down 2% in the premarket trading on the Q2 announcement, to under $39/share. Musk had offered $54.20/share for Twitter.

Twitter, in its lawsuit against Musk, alleged that the tech mogul has “repeatedly disparaged Twitter and the deal, creating business risk for Twitter and downward pressure on its share price.” Musk claims he needs verification of Twitter’s claim that fake and spam accounts are under 5% of DAUs; Twitter’s lawyers say Musk just has buyer’s remorse and has acted in bad faith.

Obviously, Musk can’t carry all the blame for Twitter’s results. On Thursday, Snap, parent of Snapchat, reported Q2 earnings shy of already-reduced expectations, telling investors it would “substantially” slow down hiring amid a revenue deceleration. “Demand growth on our advertising platform has slowed significantly,” Snap said, saying it is seeing intensifying competing for shrinking ad budgets.

Twitter did not host provide forward-looking guidance, nor did it host a Q2 earnings call or provide an investor letter discussing results. As it did in reporting Q1 results, the company cited “the pending acquisition by an entity affiliated with Elon Musk.”

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