Good News for Twitter Inc.?
Despite another quarter of slowing revenue growth, investors were cautiously optimistic about Twitter Inc. (NYSE:TWTR) after it announced it would slash nine percent of its workforce.
The announcement came as part of the company’s third-quarter results, during which Twitter delivered $616.0 million in revenue, reflecting an eight-percent increase from the same period last year. (Source: “Twitter Announces Third Quarter Results,” Twitter Inc., October 27, 2016.)
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Generally accepted accounting principles (GAAP) income showed $103.0 million in net losses, but after adjusting for things like stock-based compensation, the company showed non-GAAP profit of $92.0 million.
Unfortunately, Twitter’s user base stayed relatively stagnant. It only grew three percent year-over-year, all but confirming suspicions that it has hit a ceiling in terms of popularity. Since newer social media platforms, like Instagram and Snapchat, are monopolizing the time of younger users, Twitter has had to find alternative ways to monetize its service.
Judging by this quarter’s earnings report, data licensing could be the ticket. The company made $71.0 million from those activities, which reflected a 26% increase from the same quarter last year.
The deceleration of revenues has been an ominous sign for Twitter’s share price, but it was buoyed in recent weeks as several suitors explored buying out Twitter.
Alphabet Inc. (NASDAQ:GOOG), salesforce.com, inc. (NYSE:CRM), and Walt Disney Co (NYSE:DIS) all expressed interest in an acquisition, but ultimately they all took a step back. None of them was willing to engage in a bidding war, something that investors found disappointing.
This is the first earnings report since those buyout talks fell through, which means the market is back to judging Twitter on its fundamentals. At present, investors appear moderately bullish on the company’s entry into live online streaming and its efforts to cut costs.
“Our strategy is directly driving growth in audience and engagement, with an acceleration in year over-year growth for daily active usage, Tweet impressions, and time spent for the second consecutive quarter,” said Jack Dorsey, Twitter’s chief executive officer. “We see a significant opportunity to increase growth as we continue to improve the core service.”
“We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth,” he continued. “The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”
