Twitter Inc. (TWTR, Financial) released its first quarter financial results on Tuesday. Much to the disappointment of investors, the results were not up to the mark and shares were seen tumbling after the report was made public. The stock fell almost 6% before trading on the NYSE was halted and then fell another 18% at $42.27 by the close of the market. The first quarter financial report was supposed to be disclosed after the close of the stock market. However, it may seem that the reports were declared prior to the close of the market. NYSE was asked to stop trading once Twitter realized that there had been a leak. Officials at Twitter are investigating the matter as to reveal the source of the leak.
Q1 Highlight
The revenue of the online social networking site saw an increase of 74% to $436 million for the first quarter. However, the reported revenue was much lower than the expected $456 million. The reason for the increase was partly due to the acquisition of TellApart, a leading marketing technology company. The CEO also attributed the increase to the success of Periscope. Periscope was launched recently and in the first ten days of the launch, around 1 million signups were recorded. Hence, that particular division saw a 95% growth YOY to $48 million. Twitter, in the fourth quarter of 2014 reported a 94% growth in revenues. The main reason for this was the introduction of a new advertising model. According to this model, revenue from ads would be generated only if the user would download the app, rather than the previous model where revenue would be generated if the user clicked on the ad. Adjusted earnings reported was $0.07 a share on $436 million revenue. This was better than Wall Street’s estimate that Twitter would report a $0.04 earnings on $457 million revenue.
MAU’s (Monthly average Users) saw an 18% increase year-over-year. The reported 302 million MAU’s were as per expectations. Mobile MAU’s reported was 241.6 million as compared to the 243 million estimates. Mobile Monthly Average Users comprised of 80% of the overall MAU’s in the quarter. The advertising revenue rose 72% to $388 million. If not for the negative effect of foreign exchange rates, the company estimated that the ad revenues would have seen a 78% increase. International revenue reported witnessed a 109% increase to $147 million from the last year. The San-Francisco based company introduced new tools to increase engagement among users. Strangers could directly message one another, introduction of auto-filling Instant timeline for users with Android, were some among many other tools.
What Investors can expect in the upcoming quarters
As far as stock performance is concerned, it does not seem that there will be a positive change in the performance. Dick Costolo, the CEO of Twitter said that the same factors which had an impact on the first quarter earnings will also affect the second quarter guidance. Wall Street has estimated the Q2 revenue outlook to be somewhere around $538 million. However, the company estimated the revenue to be much lower than Wall Street’s estimate, around $470-$485 million for the next quarter. Chris Sacca, an investor in Twitter said that the firm is still in the process of finding out an appropriate monetization strategy and these are yet the early days. The social networking company is facing pressure from shareholders to report revenues according to the perceived cultural value. Besides, the company is also facing cut-throat competition from other competitors like Google Inc. (GOOG, Financial) and Facebook Inc. (FB, Financial). No doubt Twitter is going the extra mile by introducing new services, but are those efforts really reaping benefits? It doesn’t seem so.
