Twitter Q2 Earnings Beat Estimates on $502 Million Revenue

Social media company reports 7 cents per share, nearly double analyst expectations, but disappointing on user growth

Twitter reported second quarter earnings of 7 cents per share, beating analyst expectations of 4 cents per share. The social media company reported $502 in revenue, an increase of 61 percent year over year, on Tuesday after U.S. stock markets closed.

TWTR opened on Tuesday at $34.70, rising more than 5 percent to $36.54 ahead of the release.

Wall Street analysts had forecasted EPS of 4 cents per share on $481.28 million revenue, according to Yahoo Finance.

“Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience,” said Jack Dorsey, interim CEO of Twitter. “In order to realize Twitter’s full potential, we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter’s value faster and better communicate that value.”

Average Monthly Active Users (MAUs) were 316 million for the second quarter, up 15 percent year over year, and compared to 308 million in the previous quarter. The vast majority of MAUs added in the second quarter on a sequential basis came from SMS Fast Followers.

Excluding SMS Fast Followers, MAUs were 304 million for the second quarter, up 12 percent year-over-year, and compared to 302 million in the previous quarter. Mobile MAUs represented approximately 80 percent of total MAUs.

Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased 68 percent, the company said.

For the comparable second quarter in 2014, Twitter had reported EPS of 2 cents per share on $312.17 million in revenue.

Twitter accidentally leaked its own lackluster first quarter 2015 financial results in April, about an hour before the end of the U.S. trading day. Analytics firm Selerity discovered the blunder and tweeted out the results around 3:08 p.m. ET, causing a big, expensive problem for the 140-character platform. Immediately after the leak, Twitter stock started a hard fall, dropping quickly from $51.21 per share to $41.84 and closing at $42.27, down 18 percent overall. In after-hours markets, it dipped an additional 2 percent.

On the company’s second quarter earnings call, Twitter executives stressed their primary goal of making the platform easier to use. Dorsey said that users should find the product as easy as looking out a window to see what is happening.

“Twitter can’t just be the best window to the world, it needs to be the most powerful microphone in the world. You should expect Twitter to be your biggest reach,” the interim CEO said.

The company doesn’t expect “sustained, meaningful growth” of its user base until the service is adopted by the mass market, which could take some time, Twitter finance chief Anthony Noto said in the call.

Regarding the company’s search for a new CEO, Dorsey said the company will provide updates when they have “meaningful” news: “We do not have an update today, but the search committee does feel an urgency with the search.”

Dick Costolo stepped down as CEO at the beginning of this month, citing market pressures as a factor.

“You always want to keep focused on the long-term vision, yet when you go public you’re on a 90-day cadence and there’s a very public voting machine of the stock price that accelerates that short-term thinking,” Costolo said. “I have never paid attention to people externally who are saying I should do this or that.”

Co-founder and chairman Dorsey will serve as interim CEO until a permanent leader is named.

Beatrice Verhoeven contributed to this report.