Twitter Did More Than Just Bounce Back From COVID-19

On Thursday, Twitter TWTR announced stronger than expected second-quarter earnings, lifting the social media company's stock 5% in the premarket Friday. Also after market close, Snap Inc SNAP, which also generates much of its revenue from advertising, reported better-than-expected results and saw its stock move up as much as 13%. Facebook FB rose 2%, while Google parent Alphabet GOOG went up 1%.

Q2 Figures

Revenue grew 74% YoY in the quarter fueled by a broad increase in advertiser demand. It amounted to $1.19 billion, exceeding $1.07 billion as expected by analysts polled by Refinitiv. Adjusted earnings amounted to 20 cents per share, exceeding the expected 7 cents, also according to Refinitiv. After a $1.38 billion loss in the same quarter last year, Twitter made its way to the profitability of $65.6 million. It also helped that the impact from changes in Apple's AAPL iOS 14.5 release associated with tracking was lower than expected.

Monetizable daily active users (mDAUs) rose 11% to 206 million, slightly exceeding 206.2 million StreetAccount analysts expected.

New Services

As mentioned above, Twitter introduced its first subscription service that gives users access to many features, such an Undo Tweet button. For all users who count at least 600 followers, it also released its Spaces audio chat feature on mobile devices. It also announced a Tip Jar feature that will allow users to send money on the platform.

Axing Fleets

Besides adding features, Twitter also decided to axe the stories that expire after 24 hours. After launching widely just eight months ago, it is being shut down due to low usage on August 3^rd. Instead, users will instead just see live audio chat rooms. But this decision is not just an admission that the feature didn't work because it also reveals that Twitter still needs to figure out how to get people more comfortable with tweeting regularly. Twitter has been having this struggle for a few years now and Fleets was its shot at a popular social media format invented by Snapchat SNAP and further popularized by Facebook FB-owned Instagram. It seems Twitter will need to be more innovative.

Guidance

Executives expect third-quarter revenue to come in the range between $1.22 billion to $1.30 billion. As for the whole year 2021, Twitter expects headcount and total expenses to rise at least 30% but revenue is expected to grow even faster than expenses.

The company's shares are up about 29% since the beginning of the year, while the S&P 500 index has risen 16% in the same time frame. But the main takeaway of this report is that Twitter did not only rebound from the pandemic, but it also posted the fastest revenue growth since 2014 in the quarter where it introduced its first subscription service.

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