Twitter (NYSE:TWTR) Misses Q2 Sales Targets

Adam Hejl /
2022/07/22 8:10 am EDT
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Social network Twitter (NYSE: TWTR) missed analyst expectations in Q2 FY2022 quarter, with revenue down 1.15% year on year to $1.17 billion. Twitter made a GAAP loss of $270 million, down on its profit of $65.6 million, in the same quarter last year.

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Twitter (TWTR) Q2 FY2022 Highlights:

  • Revenue: $1.17 billion vs analyst estimates of $1.33 billion (11.9% miss)
  • EPS (non-GAAP): -$0.08 vs analyst estimates of $0.14 (-$0.22 miss)
  • Free cash flow was negative $123.9 million, compared to negative free cash flow of $34.6 million in previous quarter
  • Gross Margin (GAAP): 54%, down from 64.9% same quarter last year
  • Monetizable Daily Active Users: 237.8 million, up 31.8 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 solid, averaging 18.4% annually. The initial impact of the pandemic was positive for Twitter's revenue, pulling forward sales, but quarterly revenue subsequently normalized, year over year.

Twitter Total Revenue

This quarter, Twitter reported a rather lacklustre 1.15% year on year revenue decline, missing analyst expectations.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.9% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

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 18.4% annually to 237.8 million users. This is a solid growth for a consumer internet company.

Twitter Monetizable Daily Active Users

In Q2 the company added 31.8 million daily active users, translating to a 15.4% growth year on year.

Key Takeaways from Twitter's Q2 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 $30.4 billion and more than $6.12 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 less good to see that the revenue growth was quite weak and it missed analysts' revenue expectations. Overall, it seems to us that this was a complicated quarter for Twitter. The company is down 3.88% on the results and currently trades at $38.02 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.