Twitter Inc on Friday blamed its ongoing battle to close its $44-billion acquisition by Elon Musk and a weakening digital advertising market for a surprise fall in quarterly revenue and a net loss.
The results come as Twitter has sued Musk for dropping his
offer to buy the company, and is now preparing for a legal showdown in a trial
set to begin in October. The deal uncertainty has worried Twitter's advertisers
and caused chaos inside the company.
Advertising revenue rose just 2% to $1.08 billion, missing
Wall Street expectations of $1.22 billion, according to Refinitiv IBES data.
Total second-quarter revenue, which also includes revenue
from subscriptions, was $1.18 billion, compared with $1.19 billion a year
earlier. Analysts were expecting $1.32 billion.
"Twitter is now in the unenviable position of
convincing advertisers that its ad business is solid regardless of how its
court battle with Musk ends, and its Q2 earnings show that the platform has its
work cut it out for it to do that," said Jasmine Enberg, principal analyst
at research firm Insider Intelligence.
Twitter shares were down 1.8% in trading before the bell.
Twitter said its net loss was $270 million, or 35 cents per
share, versus a profit of $65.6 million, or 8 cents per share, a year earlier.
Its adjusted 8-cent loss missed expectations for a 14-cent
adjusted profit.
Monetizable daily active users, a metric closely watched by
investors and measures users who see advertising on Twitter, grew 16% to 237.8
million, but missed analyst expectations of 238.7 million.
The San Francisco-based company said bot and spam accounts
represented fewer than 5% of users during the quarter, a figure it has repeated
since 2013.
Musk has seized on the proportion of bot and spam accounts
as his reason for backing out of the deal, accusing Twitter of withholding
information on the true number of such accounts on the service.
The company's costs and expenses jumped 31%. Expenses
related to the Musk deal totaled $33 million during the quarter, and also
recorded $19 million in severance-related costs.
Inflation pressures and fears of a recession this year have
forced some advertisers to slash their marketing budgets.
On Thursday, Snapchat parent Snap Inc posted weak revenue
growth and declined to make a forecast, citing "incredibly
challenging" conditions as advertisers cut back on spending.
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