Twitter reported second-quarter earnings Thursday that missed analyst expectations on revenue and beat on active users.
Twitter said it saw “moderate recovery” to its ad business compared with March, but ad revenue was still down 23% year over year.
Twitter’s stock was up more than 5% following the report.
Here are the key numbers:
Loss per share: $1.39, adjusted, which is weighed down by a $1.1 billion loss related to a noncash deferred tax asset, making it difficult to compare to analyst estimates.
Revenue: $683 million vs. $707 million expected in a Refinitiv survey of analysts.
Monetizable daily active users (mDAUs): 186 million vs. 172.8 million expected by StreetAccount.
The report comes one week after Twitter suffered a serious hack compromising the accounts of major figures including former President Barack Obama and Tesla CEO Elon Musk.
Twitter grew mDAUs 34% year over year in the quarter, the highest rate since it began reporting the metric. It attributed the growth in large part to shelter-in-place orders around the world and more global discussion about the pandemic and other major events. Twitter has been experimenting with virtual events to spark conversation as large sporting events have been canceled.
Last quarter, Twitter offered few signs of recovery after advertising spending took a hit at the start of the pandemic in the U.S. in March. But in Thursday’s letter to shareholders, Twitter said, “We saw a gradual, moderate recovery relative to March levels throughout most of Q2, with the exception of late May to mid-June, when many brands slowed or paused spend in reaction to US civil unrest.”
CFO Ned Segal told Andrew Ross Sorkin on “Squawk on the Street,” that the user surge it saw in March has seemed to stick even as some lockdown restrictions have eased.
Twitter said advertising revenue was $562 million, down 23% year over year. Advertising revenue was down just 15% year over year in the last three weeks of June, according to the report.
“Demand gradually improved once brands returned after the [George Floyd] protests subsided,” Twitter said.
The company said it has now finished its ad server rebuilding after it had blamed the server for its Q3 2019 earnings whiff. The completed project should allow Twitter to better target and monetize ads.
Dorsey addressed Twitter’s exploration of new lines of revenue on the company’s earnings call. Earlier this month, a job post alluding to a subscription product created buzz among investors. Dorsey said he wanted to ensure “that any new line of revenue is complementary to our advertising business.”
Twitter was lumped into a pause on social media spending by several advertisers who took part in the ad boycott of Facebook coordinated by civil rights groups. Twitter has been generally more aggressive than Facebook in moderating messages, including by President Donald Trump, and has banned political advertising. Dorsey told analysts on the call that advertisers are acknowledging the steps they’ve taken.“People are taking note of our differences and also at the same time seeing a lot of the opportunity on Twitter as we advance our roadmap,” he said.
CEO Jack Dorsey began his call with analysts apologizing for Twitter’s hack last week that allowed attackers to access the Twitter accounts of major figures including former Vice President Joe Biden and Microsoft founder Bill Gates and post scam messages from their accounts soliciting cryptocurrency.
“Last week was a really tough week for all of us at Twitter,” Dorsey said. “We feel terrible about the security incident that negatively affected the people we serve and their trust in us. Security doesn’t have an end point, it’s a constant iteration to stay steps ahead of adversaries. We fell behind both in our protections against social engineering of our employees and restrictions of internal tools, and for that, I apologize on behalf of our company.”
Twitter has since said the hackers manipulated employees to gain access to internal systems that allowed them to reset passwords and log into 45 of 130 targeted accounts. For eight accounts of nonverified users, (likely meaning accounts for less prominent figures) the attackers downloaded the accounts’ information. On Wednesday, Twitter said it believes the attackers accessed the direct message inboxes of up to 36 of the targeted accounts.
In his 360aproko interview, Segal said he didn’t anticipate the fallout of the hack requiring a significant increase in expenditures.
“From an investing perspective, this is an area where we’ve long invested, and so we typically find when something like this comes up, it doesn’t necessarily mean a lot more investment, but it does sometimes mean that we ask people for whom they work on a number of things to really drop everything and focus on this so we can fix it,” he said.
Twitter’s hack has once again made it a subject of government scrutiny. But beyond the hack, Twitter has had to navigate an executive order from President Donald Trump targeting a liability shield for tech platforms, and more recently, a call for its CEO to testify in front of a congressional antitrust panel alongside CEOs from Amazon, Apple, Facebook and Google. Conservative lawmakers and Trump have repeatedly claimed the company exerts bias in its moderation policies, which Twitter has denied. Segal said on 360aproko that he did not know whether Dorsey would testify.
In its letter to shareholders, Twitter noted that it has “stepped up” its annotation of tweets that it believed violated its policies against misleading information. Internal models showed those actions prevented 68 million unannotated impressions from occurring. It’s also rolled out specific improvements to detect Covid-19 related misinformation.
