Social media Twitter turned into a deficit as it issued an “earning shock” in the second quarter amid the announcement of the acquisition cancellation from Tesla CEO Elon Musk.
Twitter announced on the 22nd (local time) that sales in the second quarter of this year fell 1% from the same period last year to $1.18 billion. This is 11% lower than the average analyst forecast of $1.32 billion compiled by financial information company FactSet. Daily active users (DAU) rose slightly from 229 million in the first quarter to 237.8 million in the second quarter, but advertising sales, which account for the majority of sales, rose 2% from a year ago to only $1.08 billion. 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 deficit with a net loss of $270 million in the second quarter of this year. The net loss per share was $0.35 against Wall Street’s forecast of $0.14 per share.
Twitter analyzed itself that “the retreat of the advertising industry related to the macroeconomy and the uncertainty of the pending acquisition of Twitter” are the reasons for the poor performance. Twitter released only a short press release on its second-quarter earnings, and did not hold conference calls with analysts in the stock market.
Musk abruptly announced the cancellation of the acquisition contract on the 8th after agreeing to acquire Twitter for $44 billion in April. CEO Musk claimed that Twitter violated the terms of the acquisition contract related to providing fake account status. Twitter refuted the claim and filed a complaint with the Delaware Equity Court on the 13th to implement the acquisition agreement. Securities firm Truis Security analyzed that Twitter’s slowdown in advertising sales is a sign that confusion over Musk’s acquisition deal is annoying advertisers.
Meanwhile, Snap, a rival social media company on Twitter, reported its second-quarter earnings, the slowest increase in sales since the IPO the previous day. Snap said sales in the second quarter of this year were $1.11 billion, up 13 percent from the same period last year. However, this is the lowest sales growth rate compared to the same period last year since Snap was listed. Snap’s stock price fell 38 percent on the day.