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Twitter Reports Earnings Tomorrow, Highlights for Investors

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Twitter is gearing up to report its second-quarter earnings before the market opens on Thursday. Twitter will be the second major social media company to report its earnings this season. Snapchat parent Snap reported its second-quarter earnings after the market close on Tuesday. Facebook and Pinterest will likely report their earnings on July 29 and July 31, respectively.

Twitter’s earnings report will come on the back of a high-profile hacking incident that impacted some prominent U.S. accounts. Last week, hackers took control of Amazon CEO Jeff Bezos, Tesla CEO Elon Musk, former president Barack Obama’s Twitter accounts and posted bitcoin scams. Bill Gates and Joe Biden were also impacted by the Twitter hacking. Twitter CEO Jack Dorsey has faced questions from Congress about the account hacking incident.

Twitter’s stock price dropped following the hacking incident, which shaved some of the stock’s gains this year ahead of the earnings report. Currently, the stock sports a 16 percent gain for the year. The stock is above the market benchmark S&P 500 Index, which has climbed less than 1.0 percent for the year. Facebook, Pinterest, and Snap stocks have climbed 18 percent, 38 percent, and 52 percent this year, respectively.

Twitter’s earnings report will arrive at a time when the company has stepped up efforts to crack down on toxic content. The platform has banned and limited accounts tweeting QAnon conspiracy theories.

Twitter’s earnings expectations

Twitter reported its first-quarter earnings results on April 30. The company delivered an adjusted EPS of $0.11, which matched the consensus estimate. The company’s revenue of $808 million rose 2.6 percent YoY (year-over-year) and beat the consensus estimate at $776 million. Since Twitter’s first-quarter earnings report, the stock has climbed about 30 percent.

For the second-quarter earnings report, analysts expect Twitter to post an adjusted EPS of -$0.01 on revenue of $708 million. In the second quarter of 2019, Twitter’s earnings report delivered an adjusted EPS of $0.20, which beat the consensus estimate at $0.19. The company’s revenue of $841 million rose 18 percent and beat the consensus estimate at $829 million.

Twitter users and its advertising business

When Twitter reports its earnings, a lot of investors will watch the user metrics. The company added 14 million daily active users in the first quarter and finished the period with 166 million daily users. The user growth increased 24 percent YoY—the highest in at least two years.

Twitter noted in its earnings report that global talk about the coronavirus pandemic boosted its subscriber growth in the second quarter. Snap’s Snapchat also added a large number of users in the first quarter due to the coronavirus pandemic. However, Snap’s second-quarter earnings numbers show that the initial user growth benefit from the COVID-19 pandemic is wearing out. Snapchat only added 9 million daily users in the second quarter compared to 11 million in the first quarter.

The COVID-19 pandemic might have boosted social media companies’ user growth, but it has weighed on advertising spending. Social media companies like Twitter rely on advertising for most of their revenue. Twitter’s advertising sales rose by just $3.0 million in the first quarter. Brands slashed their marketing budgets after the pandemic struck. During the earnings call, Snap executives warned of another slowdown in advertising sales in the third quarter.

As Twitter prepares to report its earnings, there is hope that the company could launch a subscription product. A paid subscription product would allow Twitter to diversify its revenue sources outside the advertising sector. Previously, the company explored building a premium version of its TweetDeck service.

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