Twitter Whiffs on Q3 Earnings, Stock Tanks 20% in Pre-Market Trading

Social platform points to “bugs” that impacted its targeted advertising business

Twitter’s stock price crashed 20% in pre-market trading on Thursday morning, after the social media giant reported it fell short of both earnings and revenue estimates during the third quarter. The sales and earnings misses offset a healthy Q3 spike in users, at least according to the early response of Wall Street.

The company, in its letter to shareholders, pointed to “bugs” that impacted its ability to “target ads and share data with measurement and ad partners.” Twitter also “discovered that certain personalization and data settings were not operating as expected. We believe that, in aggregate, these issues reduced year-over-year revenue growth by 3 or more points in Q3.”

Twitter posted Q3 earnings per share of 17 cents, about 3 cents shy of analyst estimates. Sales increased 9% year-over-year to 824 million, but fell well short of analyst projections of $875 million; $702 million in ad revenue made up the bulk of its Q3 sales.

Compounding its bug problem, Twitter pointed to “greater-than-expected advertising seasonality” in July and August in explaining its Q3 revenue miss.

Twitter’s stock fell nearly 20% in pre-market trading to about $31 per share. If the losses hold through the end of Thursday, it would nearly wipe out a strong performance from Twitter’ stock to date this year, after opening 2019 at about $29 per share.

The company, like most social media platforms, is  typically has its share price closely tied to whether it reports strong user growth. But the pre-market stock drop comes despite Twitter hitting 145 million “monetizable daily active users,” its internal metric for DAUs, marking a 17% year-over-year growth. The company added 6 million mDAUs during Q3.

“We drove strong growth in monetizable DAU (mDAU), up 17% year-over-year, driven by ongoing product improvements. We’re continuing to improve relevance while testing ways to make it easier for people to find what they are looking for on Twitter,” Twitter chief Jack Dorsey said in a statement.

Dorsey added Twitter continues “to make progress on health, improving our ability  to proactively identify and remove abusive content, with more than 50% of the tweets removed for abusive content in Q3 taken down without a bystander or first person report.”

Twitter will host an earnings call at 8 a.m. ET to discuss its earnings.