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Twitter (TWTR) Earnings Q3 2019

Twitter shares held as much as 20% Thursday after the company reported "headwinds" about advertising and revenue and missed Wall Street top and bottom line expectations for the third quarter.

This is what the company reported, compared to what Wall Street analysts expected, according to Refinitive Consensus Estimates:

  • Earnings per share: 17 penny, against 20 penny expected
  • Revenue: 823.7 Million Dollars, versus $ 874.0 Million Expected
  • Revenue for Active Active Users: 1[ads1]45 Million

The company cited "a number of headwinds" in revenue shortfalls, including product issues and lower than expected advertising volumes in July and August.

"In Q3, we discovered and took steps to fix bugs that primarily affected our old Mobile Application Promotion (MAP) product, which affected our ability to target ads and share data with measurement and ad partners , "the company said in the shareholder letter. "We also found that certain personalization and data settings did not work as expected. We believe that these problems overall reduced revenue growth year-on-year by 3 or more points in Q3."

Twitter headed for lighter revenue in the fourth quarter than Wall Street was looking for. The company expects to generate revenue of between $ 940 million and $ 1.01 billion – just shy of the $ 1.06 billion that analysts surveyed by Refinitiv had predicted.

In its shareholder letter, the company warned that headwinds during the third quarter will "continue to weigh on the overall performance of our advertising business in the short term."

Advertising revenue for the quarter was $ 702 million, 8% higher than the same quarters in 2018, but significantly lower than $ 756 million in ad revenue that analysts surveyed by FactSet had predicted.

Total advertising commitments increased 23% year over year and cost per engagement fell 12%.

Last quarter, Twitter stopped reporting active users each month and switched to a new growth metric – monetizable daily active users – to measure the daily active users who are shown ads on the platform.

The 145 million mDAUs that Twitter reported for the third quarter are up 4% from the second quarter of 2019, when the company reported 139 million mDAUs, and an increase of 17% the year before.

The "monetizable" distinction is why, Twitter says, its mDAUs do not fall under the total DAUs of social media rivals like Snap and Facebook, which boast 203 million and 1.59 billion active users respectively .

"Despite the challenges, this quarter validates our strategy of investing to drive long-term growth. Work remains to deliver improved revenue products. We will continue to prioritize our advertising products along with health and investments to drive continuous growth in mDAU, "said Ned Segal, Twitter's CFO.

Twitter's quarterly expenses increased by 17% during the third period, to $ 780 million, partly due to hiring and investment in sales, marketing, research and development. The company closed the quarter with 4,600 employees, 300 employees more than at the end of the second quarter.

The Company expects to continue to use. For the fiscal year 2019, Twitter predicts that investments will come in between $ 550 million and $ 600 million, representing a large increase from total 2018 spending of $ 487 million.

Prior to the report, Twitter shares were up 35% so far in 2019, with a market size of over $ 30 billion. Thursday's stock flow before marketing would shave $ 6 billion off the company's market values, if the losses persist in regular trading.

This story is evolving. Please check for updates.

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Subscribe to CNBC on YouTube. [19659002] Correction: This story has been updated to correct the quarter where Twitter reported 139 million monetizable active users daily. The report came during the second quarter of 2019.

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