Twitter (NYSE:TWTR) Misses Q1 Revenue Estimates

Radek Strnad /
2022/04/28 8:43 am EDT
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Social network Twitter (NYSE: TWTR) missed analyst expectations in Q1 FY2022 quarter, with revenue up 15.9% year on year to $1.2 billion. Twitter made a GAAP profit of $513.2 million, improving on its profit of $68 million, in the same quarter last year.

Is now the time to buy Twitter? Access our full analysis of the earnings results here, it's free.

Twitter (TWTR) Q1 FY2022 Highlights:

  • Revenue: $1.2 billion vs analyst estimates of $1.22 billion (2.04% miss)
  • EPS (non-GAAP): $0.90 vs analyst estimates of $0.03 (beats by $0.87)
  • Free cash flow was negative $34.6 million, compared to negative free cash flow of $666.8 million in previous quarter
  • Gross Margin (GAAP): 57.7%, down from 63.2% same quarter last year
  • Monetizable Daily Active Users: 229 million, up 30 million year on year
  • Twitter has previously entered into a definitive agreement to be acquired by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion

Born out of a failed podcasting startup, Twitter (NYSE: TWTR) is the town square of the internet, one part social network, one part media distribution platform.

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

Sales Growth

Twitter's revenue growth over the last three years has been strong, averaging 20% annually.

Twitter Total Revenue

This quarter, Twitter reported a less than stellar 15.9% year on year revenue growth, and this result fell short of what analysts were expecting.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 19.5% over the next twelve months.

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Usage Growth

As a social network, Twitter can generate revenue growth by increasing user numbers, and by charging more for the ads each user is exposed to.

Over the last two years the number of Twitter's daily active users, a key usage metric for the company, grew 20.7% annually to 229 million users. This is a strong growth for a consumer internet company.

Twitter Monetizable Daily Active Users

In Q1 the company added 30 million daily active users, translating to a 15% growth year on year.

Key Takeaways from Twitter's Q1 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Twitter’s balance sheet, but we note that with a market capitalization of $37 billion and more than $6.26 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

It was great to see that Twitter’s user base is growing. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Twitter missed analysts' revenue expectations and the revenue growth was quite weak. Overall, it seems to us that this was a complicated quarter for Twitter even if it wasn't for the acquisition bid. The company is up 1.13% on the results and currently trades at $49.09 per share.

Twitter may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.