Twitter Cites Elon Musk “Uncertainty,” Ad “Headwinds” as Quarterly Earnings Fall Short

Social media giant Twitter on Friday posted higher usage figures, but missed second-quarter earnings and revenue expectations.

Twitter reported revenue of $1.18 billion in the second quarter of 2022, down 1 percent year-over-year, marking the company’s latest update to investors since Tesla and SpaceX CEO Elon Musk struck an agreement to acquire the company for around $44 billion, only to then withdraw the takeover offer.

The revenue line missed on an analyst expectation for $1.35 billion. Twitter also posted an adjusted 8 cents per-share loss, which fell short of a 14 cents per-share profit expectation by Wall Street.

The company said the latest financial results reflected “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.”

On Friday, as an online ad play, Twitter also posted quarterly advertising revenue at $1.076 billion, up 2 percent from a year-earlier $1.053 billion. The company’s first quarter ad revenues were up 23 percent year-over-year to $1.11 billion.

Slowing digital ad sales for Twitter followed Snap disappointing investors with falling demand for its online ad platform amid concerns for inflation and a recession risk. Wall Street will get better visibility into the online ad landscape when Google-parent Alphabet and Meta report their latest financials next week.

Meanwhile, Twitter’s key subscriber metric, monetizable daily active users, hit 237.8 million in the quarter, up from 229 million in the first quarter and 206 million last year. That beat a 236 million mDAU estimate from Zack Consensus.

Despite the online legal battle with Musk, Twitter is under pressure to prove to investors it can continue to grow and retain its user base. In its quarterly results, Twitter also reported a net loss at $270 million, compared to a year-earlier net income of $65.6 million.

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Amid a potential sale that will leave Twitter as a private company, the social media firm chose not to hold a post-earnings analyst call to discuss its results Thursday. That’s as Wall Street focuses on the legal battle and ongoing drama Twitter faces from Musk, and its impact on the social media company’s volatile share price.

On July 8, Musk announced he was “terminating” his proposed acquisition of Twitter, arguing in a letter that the company was in “breach” of the merger agreement. Then, on July 12, Twitter responded by launching a lawsuit in the Delaware Court of Chancery against Musk over his decision to scrap the $44 billion takeover, contending he’s required to consummate the deal in accordance with the merger agreement.

Twitter in its latest financial results reiterated that the Musk deal still stands and needs to be completed. “Twitter believes that Mr. Musk’s purported termination is invalid and wrongful, and the merger agreement remains in effect,” the social media giant said.

“Adoption of the merger agreement by our stockholders is the only remaining approval or regulatory condition to completing the merger under the merger agreement. The exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to ongoing litigation, adoption of the merger agreement by our stockholders and the satisfaction of the remaining closing conditions,” Twitter added.

That trial has been fast-tracked to October. Shares in Twitter were down 85 cents, or just over 2 percent, to $38.63 in pre-market trading Friday.