Twitter Falls Short on Q2 Revenues, But Profits Still Beat Expectations

Stock drops in after-hours trading following news that service added just 3 million users

Twitter exceeded profitability expectations for its second quarter, even though it fell short on revenue and added just 3 million users, the company announced Tuesday after the close of market.

The social media giant announced quarterly revenue of $602 million and earnings of 13 cents a share. Revenue was up 20 percent year over year, but still made the second quarter its slowest in terms of revenue growth yet.

Analysts surveyed by Thomson Reuters projected Twitter to report revenue of about $607 million and earnings of 10 cents a share. Twitter’s stock is down nearly 10 percent in after-hours trading.

“We’ve made a lot of progress on our priorities this quarter,” Twitter CEO Jack Dorsey said in a statement accompanying the earnings release. “We
are confident in our product roadmap, and we are seeing the direct benefit of our recent product changes in increased engagement and usage. We remain focused on improving our service to make it fast, simple and easy to use, like the ability to watch live-streaming video events unfold and the commentary around them.”

Active users also continue to stagnate, plagued by problems with onboarding –Twitter can often seem like a proudly exclusive club, as opposed to user-friendly Facebook — and notably, harassment. “Ghostbusters” star Leslie Jones was a recent high-profile target of online hate speech, which led to Twitter banning right-wing provocateur Milo Yiannopoulos from the platform.

Twitter first cleared 300 million monthly active users during the first quarter of 2015, but only broke 310 million this quarter, adding 3 million users to get up to 313 million in total. During the same time, Facebook and Snapchat have seen their user bases grow by double-digit percentages year-over-year.

During founder Dorsey’s current term as CEO, Twitter has prominently focused on securing rights to stream live events, which Dorsey touted in the letter.

[graphiq id=”5q6Ht25W4gR” title=”Twitter Inc. (TWTR) Quarterly Revenue & Growth Rate” width=”650″ height=”503″ url=”” link=”” link_text=”Twitter Inc. (TWTR) Quarterly Revenue & Growth Rate | FindTheCompany” ]

Twitter has signed deals with the NFL (for its Thursday night package) and Wimbledon, and has broadcast footage from both national political conventions. Just last week, the company agreed to partner with the NBA for an exclusive pregame show with Twitter integration, and this week it announced streaming deals for select out-of-market MLB and NHL games.

But most of its streaming rights are for second-tier events, which don’t drive big advertising dollars. For example, Twitter’s deal with the Pac-12 includes sports such as water polo and wrestling, but not football and basketball. The NBA deal also does not include any live games.

If it can’t put itself on a better trajectory, Twitter’s lifeline could come through an acquisition during what’s become a big few months for tech M&A.

After scooping up Internet 1.0 icon AOL last year, Verizon announced Monday that it has agreed to buy Yahoo for $4.8 billion.

On June 13, Microsoft agreed to buy LinkedIn for more than $26 billion in cash.

If Twitter’s stock price stays in the doldrums — it currently trades well below its IPO price of $26 a share — it could become an even more enticing bargain for an opportunistic buyer.

Twitter will hold a conference call at 5 p.m. ET.