Twitter’s leaked earnings disappoint investors

By Taylor Hall

Twitter shares plummeted more than 6 percent after investors grew concerned over declining engagement and ad and user growth following the release of the company’s first quarter earnings late Tuesday.

The company’s net loss widened 22 percent to $162.4 million, or 25 cents per diluted share, from $132.4 million or 23 cents in the year ago period. Analysts had expected a net loss of 24 cents per diluted share.

Twitter advised investors to reduce expectations for the rest of the year, and warned that user and engagement growth would continue to decline.

Revenue rose 74 percent to $435.9 million from $250.5 million a year ago, falling short of the analysts’ consensus estimate of $456.2 million compiled by Bloomberg LP.

Shares of the company were down $2.64 to $39.48 Wednesday afternoon.

Twitter’s earnings were leaked on Twitter an hour before the company’s scheduled release time by financial analytics firm Selerity Corp. The New York Stock Exchange halted trading so Twitter could publish its earnings, but the shares had already tumbled.

During the company’s earnings conference call Tuesday, Twitter executives explained that the advertising slowdown was due to the company’s transition to a new advertising model that raises the bar on what counts as engagement.

“Today, this results in a lower put-through rate and less revenue for Twitter, but higher [return on investment] expected long-term through [the] higher bar,” said Twitter CEO Dick Costolo.

The company said it will focus on growing its user base and user retention, and seeks to capture the 500 million users who visit the site without logging in each year.

“This quarter’s lower-than-expected results and absence of [monthly active user] guide are concerning,” said analyst John Blackledge of Cowen and Co., who lowered FY15 and longer-term estimates for the company’s performance. “The off-[Twitter] and logged out user opportunity remain nascent, but could be beneficial long-term.”

Prior to the report, Twitter’s shares climbed 44.5 percent in the past year, compared to the Standard & Poor’s 500 Index, which rose 13.4 percent in that period.

Costolo said the company was excited to see the growth of “rich media” across the platform, including through Periscope, the company’s recently-acquired live-streaming video application.

“We saw last night with the events in Baltimore, if you happened to be on Periscope, it’s absolutely riveting,” said Costolo. The CEO advised that since acquiring Periscope in March, the company has seen “orders of magnitude increases” in the volume of native mobile video shared to Twitter.

Photo at top: Twitter’s earnings leaked on Twitter yesterday. So meta. (Medill/Taylor Hall)