Chief executive Jack Dorsey
Twitter has reported fewer monthly active users than analysts expected and warned that the closely-watched figure could keep falling as it deletes rougue accounts, sending its shares sharply down in early trading.
The company said the work it was doing to clean up its platform by purging automated and spam accounts had some impact on its user metrics in the second quarter, and that it would prioritise removing suspicious accounts and reducing abusive content over projects that could attract more users.
Twitter, like Facebook, has been under pressure from regulators in several countries to weed out hate speech, abusive content and misinformation, better protect user data and boost transparency on political ad spending.
Monthly active users fell by one million in the second quarter from the first to 335 million. Analysts had expected a gain of one million users, and the results could harden concerns that Twitter lacks a clear strategy to grapple with various platform problems and grow usage and revenue together.
Twitter said the decline in the third quarter would be in the mid-single-digit millions, suggesting a sequential decline to around 330 million users. Analysts, on average, had expected 340 million monthly active users in the third quarter, according to Thomson Reuters.
“We are making active decisions to prioritize health initiatives over near-term product improvements that may drive more usage of Twitter as a daily utility,” the company said in a shareholder letter accompanying the results.
The user outlook came as Twitter reported higher-than-expected revenue thanks to the FIFA World Cup driving ad demand, strength in video ads and booming international ad revenue. Twitter also earns revenue from licensing data.
The quarter marked the first time overseas revenue contributed the majority of Twitter’s total advertising sales.
Chief Executive Jack Dorsey said in a statement that daily users grew 11% compared with a year ago, saying this showed that addressing “problem behaviors” was turning the service into a daily utility. The company did not reveal the number of daily users.
Revenue of $711m, mostly from advertising and up 24% from last year, exceeded the average estimate of $696 million among analyst research aggregated by Thomson Reuters. Twitter said it benefited from two weeks of the FIFA World Cup in the second quarter, with ads tied to the soccer tournament generating $30m in revenue.
Profit was $100m, with a $42m boost due to a tax accounting move. Twitter turned its first-ever profit in the fourth quarter of 2017 and has been profitable ever since, but warned last quarter revenue growth would slow this year and costs would rise.
Earnings excluding items were 17 cents per share, in-line with analyst estimates.
“Investors are overreacting to (monthly active user) trends,” BTIG analyst Richard Greenfield said about the share fall. “This is an identical overreaction that we saw in Q2 last year. Last year’s Q2 created an incredible buying opportunity in the stock.”
