Twitter Q2 Revenue Records Highest Growth Rate Since 2014

Sales and Earnings Per Share Surpass Wall Street Expectations
Driven by Increased Advertiser Demand

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] Social networking service (SNS) company Twitter posted revenue and profits in the second quarter of this year that exceeded Wall Street expectations, recording its highest growth rate since 2014.

CNBC reported on the 22nd (local time) that Twitter recorded second-quarter revenue of $1.19 billion and earnings per share of 20 cents.

This far surpassed Wall Street's average earnings forecast compiled by financial information provider Refinitiv, which predicted revenue of $1.07 billion and earnings per share of 7 cents.

In particular, revenue increased by 74% compared to the same period last year, marking the largest growth since 2014.

Twitter explained that "advertiser demand has broadly increased."

On that day, Twitter's stock price closed at $73.50 in after-hours trading, up 5.65% from the previous trading day on the New York Stock Exchange. Twitter's stock price has risen nearly 30% since the beginning of this year.

Net profit also turned positive from a net loss of $1.38 billion in the second quarter of last year to a profit of $65.6 million in the second quarter of this year.

This increase in net profit is interpreted as being due to a rise in advertising revenue as the number of users exposed to ads increased. Twitter stated, "The number of daily active users (mDAU) exposed to ads on Twitter increased by 11%."

However, the daily active user count was slightly below the market expectation of 262 million, coming in at 260 million.

mDAU refers to users who access the Twitter site or Twitter application daily and can be shown advertisements.

Earlier, Twitter launched its first paid subscription service, 'Twitter Blue,' to secure profitability. Users who subscribe to this service can undo tweets even after posting them. Additionally, they can use features such as organizing tweets saved in the favorites folder and 'Reader Mode,' which makes reading long connected tweets called threads easier by grouping them by topic.

Twitter's launch of the paid subscription service is interpreted as an effort to create new revenue sources in a situation where advertising revenue accounts for 86% of total sales.

Twitter also stated that the impact of Apple's newly introduced privacy enhancement measures in iPhone operating system (iOS) 14.5 was not as significant as expected.

At the end of April, Apple updated iOS to require iPhone users to be asked whether apps can track their search activities or website visit records when the app is first launched.

Jack Dorsey, CEO of Twitter [Photo by Reuters]

After most users chose to block tracking of their usage records, the market has been closely watching how much damage companies like Facebook, Google, Twitter, and Snap, which have used such activity records for targeted advertising, would suffer.

Meanwhile, Twitter released results that exceeded market expectations on this day, and Snap, which also announced its earnings on the same day, posted results that surpassed expectations.

Regarding future earnings forecasts, Twitter projected that third-quarter revenue would range from $1.22 billion to a maximum of $1.3 billion. This exceeds experts' estimates of $1.17 billion.

Market research firm Bernstein recently released a report predicting that major companies in the digital advertising industry will continue the strong revenue growth curve they have shown over the past few quarters.

Bernstein's analyst analyzed that the impact on advertising spending due to limitations on targeted advertising capabilities would not be significant. Advertising budgets spent on iPhone users are shifting to Google's Android users, and the advertising targets are changing.

The analyst added that there is a strong tailwind in the advertising industry that more than offsets such shocks, expecting new advertising spending in sectors like travel, financial services, and business-to-business (B2B) to replace advertising in retail, media, and gaming.

The report analyzed, "Despite challenges caused by Apple's changes, Google and Facebook still dominate the advertising market and remain platforms frequently preferred by advertisers."

This content was produced with the assistance of AI translation services.