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Twitter's stock tanks after warning its revenue growth will continue to 'lag' its recent spike in users

Jack dorseyTeresa Kroeger/Getty ImagesTwitter CEO Jack Dorsey.

Twitter missed analysts’ expectations for its fourth-quarter revenue — reporting $717 million versus estimates of $740 million — as advertising spend lagged behind a recent acceleration in daily usage of the platform.

However, the company did beat on earnings — reporting EPS of $0.16, versus the $0.12 expected by analysts.

Twitter’s monthly active users grew to 319 million, up from 317 million in the prior quarter. Daily active usage grew 11% year-on-year, up from growth of 7% in the third quarter, which the company credited to product improvements, marketing and “organic trends.”

Twitter’s stock was down 8.65% in pre-market trading on Thursday.

In a press release, Twitter CEO Jack Dorsey described 2016 as a “transformative year” in which the company attempted to focus its efforts on explaining why people use the platform and making it easier for them to use it.

Dorsey said: “We overcame the toughest challenge for any consumer service at scale by reversing declining audience trends and re-accelerating usage. As a result, in the fourth quarter, daily active usage accelerated for the third consecutive quarter, and we see this strong growth continuing. While revenue growth continues to lag audience growth, we are applying the same focused approach that drove audience growth to our revenue product portfolio, focusing on our strengths and the real-time nature of our service. This will take time, but we’re moving fast to show results.”

The $638 million Twitter booked in advertising revenue in the quarter was down 1% year-on-year. Data licensing and “other revenue” grew 14% in the quarter to $79 million.

Twitter warned its revenue growth will continue to fall behind its audience growth, “due to the sales cycle” and said it could also be negatively affected by the “escalating competition for digital advertising spending.” Some of that new competition for digital ad dollars is likely coming from rival Snapchat, which released filing for its initial public offering early this month.

In a letter to shareholders, Twitter said it has four main areas of focus in 2017: To rapidly roll out product changes that make Twitter safer; invest in its “core use case” and new product areas like live-streaming video; simplify and differentiate its revenue products; and focus on making progress toward profitability.

Twitter continues to be a loss-making company, reporting a net loss of $167 million in the quarter and a net loss of $457 million for the full financial year.

This is the first quarterly earnings Twitter has reported without its former sales chief and COO Adam Bain, who announced he was leaving the company in November. It also follows the headcount reduction Twitter announced in October, which affected around 9% of its global workforce.

Here are the key numbers from Twitter’s Q4 earnings:

Q4 revenue: — $717 million versus $740.14 million expected by analysts

Q4 EPS (adjusted): $0.16, versus $0.12 per share expected by analysts

Q1 guidance: Adjusted EBITA to be between $75 million and $95 million, adjusted EBITDA margin to be between 17% and 17.5%.

Q4 monthly active users: 319 million, up from 317 million in the prior quarter, and up 4% year-on-year.

Q4 daily active users: up 11% year-over-year.

Twitter will host a conference call with analysts at 5:00 a.m. Pacific Time/8:00 a.m. Eastern Time on Thursday.

This story is being updated live. More to follow …

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