Twitter to Cut 9 Percent of Its Global Workforce – Despite Beating Q3 Earnings Estimates

Social media company plans to consolidate sales, marketing and partnerships efforts

Last Updated: October 27, 2016 @ 10:07 AM

Twitter plans to cut 9 percent of its global workforce, the company said on Thursday. This, despite beating media analysts’ financial estimates for third-quarter 2016.

Wall Street had forecast earnings per share (EPS) of 9 cents on $605.84 in revenue, per a Yahoo Finance consensus estimate. The social media company actually reported 13 cents of EPS on $616 million in revenue. The publicly traded corporation’s advertising revenue alone was $545 million — a six percent rise from 2015. Mobile accounted for 90 percent of those total ad sales.

Additionally, the Facebook competitor’s Monthly Active Users (MAUs) rose 3 percent year over year, reaching 317 million.

Twitter’s net income for Q3 was $91.7 million. That’s up from 2015’s comparable three-month period, when the company reported $67 million in profit. Last year, the take-home translated into a dime per share for investors.

The financial achievements are currently overshadowed by the layoff announcement, however. The not-unexpected staff reduction is all part of a restructuring, one that “focuses primarily on reorganizing the company’s sales, partnerships, and marketing efforts,” the company said in its Q3 media release.

Internal accountants estimate TWTR shareholders will see the company incur $10 million-$20 million of cash expenditures as a result of the workforce restructuring. That’s mostly severance costs. There will be an additional $5 million-$10 million in non-cash expenditures, like stock-based compensation. The company expects to recognize most of the pre-tax workforce restructuring charges in Q4 2016.

Top executives are, of course, focusing on the positives this morning.

“Our strategy is directly driving growth in audience and engagement, with an acceleration in year over year growth for daily active usage, Tweet impressions, and time spent for the second consecutive quarter,” said CEO Jack Dorsey. “We see a significant opportunity to increase growth as we continue to improve the core service. We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”

“We’re getting more disciplined about how we invest in the business, and we set a company goal of driving toward GAAP profitability in 2017,” added CFO Anthony Noto. “We intend to fully invest in our highest priorities and are de-prioritizing certain initiatives and simplifying how we operate in other areas. Over time, we will look to invest in additional areas, as justified by expected returns and business results. In addition, our live strategy is showing great progress. We’ve received very positive feedback from partners, advertisers and people using the service, and we’re pleased with the strong audience and engagement results.”