Twitter slumps despite meeting Q3 expectations

Social media firm's $766m one-time litigation charge dents investor sentiment

Twitter’s stock sank by more than 9% on Wednesday, despite meeting analyst forecasts for earnings and revenue. 

Positive quarterly results

The social media giant reported adjusted earnings of 18 cents per share, instead of the 15 cents analysts polled by Refinitiv had predicted. 

Revenue of $1.284bn (£930m) was almost exactly in line with the $1.285bn forecast and constituted a 37% year-on-year increase. Advertising revenue specifically rose by over 40% from the third quarter of 2020 to $1.14bn. 

iOS and litigation

The company stated that Apple’s privacy updates, which prevents advertisers from tracking iPhone users without their consent, had less of an impact than expected. Rivals such as Facebook and Snap, in contrast, had previously said the iOS changes substantially disrupted business activity during the quarter. 

Wednesday’s dip could partly be attributed to Twitter failing to increase its number of monetisable daily active users (mDAU) from the second quarter – although, at 211 million, the company’s closely-monitored subscriber metric stood 13% higher year-on-year. 

The company’s one-time litigation-related net charge of $766m could be identified as the key driver, however. The payment comes as part of an $809.5m settlement that the company announced last month for allegedly misleading investors.

AI is the future

Although the iOS changes may have made it more difficult for social media companies to tailor their content to individual users, Twitter has identified artificial intelligence as a key driver in future personalisation. 

On the firm’s earnings call, CEO and founder Jack Dorsey stated: “Our greatest opportunity and potential for growth is around personalisation and relevance. We intend to put a lot more emphasis here. This mainly speaks to our machine learning and general AI. But it also lends itself to the new products, services, and capabilities that we have been talking about.”

The company said it expects revenue of between $1.5bn and $1.6bn in the fourth quarter, generally in line with analyst expectations.

By 12:00 (EDT), Twitter traded down 9.3% at $55.68. 

Further reading: Twitter now allows users to tip with bitcoin

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