- Twitter Inc. on Friday faced a decline in quarterly revenue and a weaker digital ad market due to Elon Musk’s $44 billion deal.
- Only 2% more was made via advertising, totaling $1.08 billion, far from the expectations of $1.22 billion.
- Analysts had predicted $1.32 billion in total revenue for the second quarter, but $1.18 billion really came in.
Twitter Inc. blamed a surprising decline in quarterly revenue and a net loss on Friday on its current legal battle to Complete Elon Musk’s $44 billion takeover of the company as well as a deteriorating digital advertising market.
The announcement of the results comes as Twitter is preparing for a legal battle in a trial that will start in October after suing Musk for canceling his offer to buy the company. The confusion about the deal has concerned Twitter’s advertisers and caused internal problems.
Refinitiv IBES figures show that advertising revenue increased just 2% to $1.08 billion, falling short of Wall Street predictions of $1.22 billion. Total revenue for the second quarter, which also covers subscription revenue, was $1.18 billion, down from $1.19 billion in the same period last year, opposite the analysts’ prediction of $1.32 billion.
“Twitter is now in the unenviable position of convincing advertisers that its ad business is solid regardless of how its court battle with Musk ends, and its Q2 earnings show that the platform has its work cut it out for it to do that,” said Jasmine Enberg, principal analyst at research firm Insider Intelligence.
On Friday, Twitter’s stock opened equal to $38.90. According to Dan Ives, an analyst at Wedbush Securities, the company’s value is reliant on the trial’s prospective outcomes and its financials aren’t impressing investors.
Compared to a profit of $65.6 million, or 8 cents per share, a year prior, Twitter reported a net loss of $270 million, or 35 cents per share. Expectations for a 14-cent adjusted profit were missed by its 8-cent adjusted loss. Although it exceeded analyst forecasts of 238.7 million, the number of monetizable daily active users, a measure of people who see advertising on Twitter, increased by 16% to 237.8 million.
The San Francisco-based company reported that less than 5% of users during the quarter were made up of bot and spam accounts, a statistic that has been consistent since 2013.
Musk mentioned the percentage of bot and spam accounts as his explanation for withdrawing from the agreement, and he charged Twitter with hiding the actual number of such accounts using the service. Twitter claimed the “pending acquisition” by Musk as the reason it would not offer financial advice, send a shareholder letter, or host an earnings conference call.
The business’s costs and expenses increased by 31%. During the quarter, costs associated with the Musk agreement came to $33 million, while employee benefits expenses came to $19 million. In May, the social networking site canceled several jobs offers to recent hires. Employees were previously informed by CEO Parag Agrawal that the company needed to reduce expenses. Some businesses have been pushed to reduce their marketing budgets this year due to market pressures and concerns about a crisis.
The parent company of Snapchat, Snap Inc, reported poor revenue growth on Thursday and declined to provide a prediction, saying “incredibly challenging” circumstances as a result of advertisers’ reduced spending.
Back Fire By The Space X Man On The Blame
After Twitter mainly mentioned its second-quarter revenue shortfall to the uncertainties around the Tesla CEO’s potential $44 billion acquisition, Elon Musk replied against the social media company on Friday.
“I’m rubber, they’re glue,” Musk tweeted.
Due to Musk’s acquisition, Twitter refused to offer financial guidance and said that it would not be holding an earnings call. The only remaining permission or legal need required for completing the transaction is shareholder approval.
Twitter shares are currently selling for about $39 per share, far less than Musk’s initial offer of $54.20 per share. Over the past year, the stock has decreased by more than 7%.
Earlier this month, Musk declared he was ending the agreement because Twitter “appears to have made false and misleading claims” when it accepted Musk’s takeover offer on April 25 and is “in significant breach of various terms” of the contract. Musk disputes Twitter’s own estimations that less than 5% of its users are made up of spam and fraudulent accounts.
Twitter referred to the “purported termination” of the agreement as “invalid and wrongful” and a “repudiation of their responsibilities under the agreement” in response to Musk and his team’s charges. In a separate lawsuit, Musk is charged with failing to “respect his responsibilities to Twitter and its stockholders since the transaction he signed no longer serves his personal interests.” Twitter is also suing Musk.
In the coming October, we are going to come across the legal battle of Elon Musk Vs. Twitter!