Shares of Twitter Inc. (NASDAQ: TWTR) plunged on Thursday after the social media company reported dismal quarterly earnings that badly missed forecasts. Investors shrugged off Twitter’s impressive user growth after it became apparent that long-term profitability wasn’t in the cards.
Q3 Earnings Update
- Earnings: $0.17 per share (adjusted)
- Revenue: $823.7 million
- Daily active users that can be monetized: 145 million
For its most recent quarter, Twitter posted net income of $37 million, which translated into $0.05 per share. On an adjusted basis, per-share earnings came in at $0.17, down from $0.21 a year ago and below expectations for $0.20.
Revenues jumped to $824 million from $758 million a year ago but were still well below forecasts of $874 million. Advertising revenue grew by 8% to $702 million, but well below the $756 million expected. The company cited several “headwinds” for its weak revenue numbers, including technical issues that affected the platform’s target advertising business.
The technical issues prompted Twitter to downgrade its forecast for fourth-quarter revenue and said the impacts could “bleed over” into 2020 as well. Fourth-quarter revenues are expected to come in anywhere between $940 million and $1.01 billion, just shy of forecasts.
“Despite its challenges, this quarter validates our strategy of investing to drive long-term growth,” chief financial officer Ned Segal said in a statement, as per CNBC. “More work remains to deliver improved revenue products. We’ll continue to prioritize our ad products along with health and our investments to drive ongoing growth in [monetizable daily active users].”
The Thursday earnings call wasn’t entirely negative, as Twitter reported a 4% quarterly increase in monetizable daily active users. In Q3, that number stood at 145 million. The bulk of those users were in international markets with a large minority in the United States.
Carnage for TWTR Stock
Twitter’s stock price crashed on Thursday, falling from $38.83 all the way down to $31.10. That represents a decline of more than 20%. More than 64.5 million shares traded hands, which is more than five times the normal rate.
By comparison, the technology-focused Nasdaq Composite Index traded half a percent higher on the day.
At current values, Twitter has a total market capitalization of $24.3 billion. Prior to Thursday’s drop, TWTR was up around 35% year-to-date. Since going public, the company’s performance has been less than stellar due to concerns over revenue growth and daily active users.
Disclaimer: Author holds no investment position in Twitter at the time of writing.