Twitter, a social media platform, turned to a loss as it reported an earnings shock in the second quarter amid an announcement that Tesla CEO Elon Musk was canceling the takeover.
Twitter announced on the 22nd that its sales in the second quarter of this year were $1.18 billion, down 1% from the same period last year. This is 11% lower than the average forecast of $1.32 billion by analysts compiled by FactSet, a financial information company. The number of daily active users (DAU) increased slightly from 229 million in the first quarter to 237.8 million in the second quarter, but advertising revenue, which accounts for the majority of sales, was only $1.08 billion, up 2% from a year earlier. In the first quarter of this year, it increased by 23%.
Twitter, which posted a net profit of $65.6 million in the second quarter of last year, turned into a loss with a net loss of $270 million in the second quarter of this year. Net loss per share was $0.35, contrary to Wall Street’s prediction of earnings per share of $0.14.
Twitter’s own analysis of the sluggish earnings was attributed to “the recession of the advertising industry related to the macro economy and uncertainty about the pending acquisition of Twitter.” Twitter issued only a brief press release on its second quarter earnings on the same day, and did not hold a conference call with stock analysts.
After agreeing to buy Twitter for $44 billion in April, Musk abruptly announced the termination of the deal on the 8th. Musk alleges that Twitter violated the terms of the deal to provide fake account status. Twitter refuted the claim and filed a complaint with the Delaware Court of Equity on the 13th to implement the acquisition agreement. Brokerage firm Truce Security said Twitter’s slowing ad sales were a sign that the confusion surrounding Musk’s deal was annoying advertisers.
Meanwhile, Twitter’s rival social media company Snap announced its second-quarter earnings, which posted the slowest sales growth since its IPO the day before. Snap said its revenue for the second quarter of this year was $1.11 billion, up 13% from the same period last year. However, this is the lowest sales growth rate compared to the same period of the previous year since Snap listing. Snap shares are down 38% on the day.