Twitter Q2 Revenue Misses Wall Street Expectations by 11% Amid Elon Musk Debacle

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Twitter Inc. posted second-quarter revenue and earnings per share Friday that fell well short of Wall Street’s expectations despite a spike in average daily users amid Elon Musk’s efforts to buy (and later back out of acquiring) the social media site.

The San Francisco company said it took in $1.18 billion in revenue for the three months ended June 30, down 1% from the $1.19 billion in Q2 2021. The total was 10.6% below the $1.32 billion forecast by Wall Street analysts, according to Yahoo Finance.

Twitter posted a net loss of $270 million, or 35 cents per share, reversing a profit of $65.6 million, or 8 cents per share last year. On an adjusted basis, the results came in at a loss of 8 cents per share, far short of the 14 cents per share profit analysts predicted.

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Twitter blamed the Tesla CEO in part for the revenue drop, stating that it reflected “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.”

It said advertising revenue rose 2% to 1.08 billion, while subscription and other revenue dove 27% to $101 million year over year.

The advertising revenue slowdown echoed the results posted by Snapchat parent Snap Inc. on
Thursday, which also fell short of Wall Street forecasts.

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One bright spot in the results was the 16.6% spike in monetizable daily active usage (mDAU), up to an average of 237.8 million across the quarter. In the U.S., average mDAU rose 14.7% from last year to 41.5 million, while internationally the average was 196.3 million mDAU, up 17% from last year.

The numbers fell short of Wall Street’s hopes for 238.1 million mDAU, but Wedbush analyst Dan Ives said they came in “better than feared and holding up relatively firm in this environment.”

“When compared to the nightmare quarter of Snap last night, it shows digital ad spending is not falling off a cliff like feared which is a positive for others in the space such as Facebook, Pinterest and Google,” Ives wrote in a note to clients.

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The company attributed the leap to “ongoing product improvements and global conversation around current events.”

Among those events, the announced sale to Musk and his attempt to abort the deal. Twitter maintained in its release that “Mr. Musk’s purported termination is invalid and wrongful, and the merger agreement remains in effect.” It noted that it has filed suit to force the sale to continue and a trial date has been set for October.

While approval from stockholders is the only remaining condition needed for the sale, Twitter acknowledged that “the exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to ongoing litigation.”

The company has sent preliminary proxy statements to shareholders, but hasn’t set a date for the vote.

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Twitter said costs and expenses leaped 31% during the quarter, to $1.52 billion. That included costs of $33 million associated with the Musk takeover drama.

Wall Street views the lawsuit as “very strong,” according to Ives, who wrote earlier this week that Twitter “walks into Delaware court with a clear upper hand in the eyes of the Street.”

Twitter accused Musk in court papers of “bad faith” and said the volatile mogul started turning against the deal amid the stock market decline that became entrenched after the deal was struck in April. Musk agreed to pay $54.20 per share for the company, whose shares closed Thursday at $39.52, down 24% since the deal was announced on April 25. Shares dipped 1.5% in premarket trading Friday after the results were released, as of writing.

The company didn’t offer guidance for the current quarter or the full year, and won’t hold a conference call to discuss the results because of the pending deal with Musk.

Musk was silent on Twitter Friday morning. He has kept his tweets mainly to news about Tesla and Space X in the past week, though on Wednesday he posted a meme that referenced a Queen song, asking, “Can you perform under pressure?”

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