Twitter’s narrative has been relatively straightforward from a financial perspective since it went public in 2013. The social platform has always struggled with user growth, and it could never grow at the pace as Facebook, Snapchat or WhatsApp. In the past, the micro-blogging giant was quite capable of increasing its revenue every quarter. Now, however, the company is having trouble gaining more users and also making money from displaying ads to those users.
Struggling on two fronts
In its second fiscal quarter earnings report, Twitter said it added 3 million users, about 1 million more than what Wall Street was anticipating. The micro-blogging site now has 313 million total monthly active users. It posted a profit of 13 cents a share on revenue of $602 million, which was worse on revenue than what Wall Street predicted but better on EPS.
Analysts surveyed by Thompson Reuters expected a profit of 10 cents a share on revenue of $607 million. But the year-over-year percentage growth is the big takeaway, which at only 20% is its lowest since going public. The figure was 61% a year ago and 124% two years ago.
In its forward-looking statement for the third fiscal quarter of 2016, Twitter said it expects revenue of about $590 million to $610 million, far less than the $678 million analysts anticipated.
A big task for Twitter’s CEO
Chief Executive Jack Dorsey is now starting his second year at the helm as he tries turn the company into a destination advertisers might spend dollars on and new users might enjoy visiting. There have been many changes since the co-founder retook control. The changes include the Moments tab, the algorithmic timeline that shows tweets out of order, a plan to increase the character limit for tweets, a handful of anti-harassment measures and increased investment in live-streaming with its standalone Periscope app.
However, nothing has made a positive impact on Twitter’s growth. With the Democratic convention underway and the Olympics kicking off next month, Twitter’s video streaming services are the only bright spot to be emphasized at this point. In a statement, Dorsey said they have made a lot of progress on their priorities this quarter.
“We are confident in our product roadmap, and we are seeing the direct benefit of our recent product changes in increased engagement and usage.”
Twitter’s stock took a steep dive following the results and is now just above its all-time low. The social network needs to figure out soon how to increase the number of users and how to court advertisers to spend money on its platform.