Twitter Earnings Beat on Both Lines in 2Q

EarningsDow Jones Newswires

Twitter Inc. said second-quarter revenue grew 61%, a reassuring sign that its advertising business is working its way past a temporary hiccup.

The company posted revenue of $502.4 million for the period ended June 30, compared with $312.2 million a year earlier. Still, it marked Twitter's weakest quarterly revenue growth as a public company, as the social-media service seeks to boost spending on its direct-response ads, which urge users to take an action such as download an app or visit a website. Twitter's revenue took a surprise hit in the previous quarter amid subpar demand for such ads after the company changed how it charges for them.

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Analysts surveyed by Thomson Reuters on average estimated Twitter would post revenue of $481.3 million.

The company remains unprofitable as it invests in new data centers and talent. It posted a loss of $136.7million, or 21 cents a share, compared with a year-earlier loss of $144.6 million, or 24 cents a share. Excluding certain expenses, Twitter said it would have earned 7 cents a share. Analysts had expected earnings of 4 cents a share on that basis.

Under Dick Costolo, who stepped down as CEO on July 1, Twitter sought to steer investors' attention to metrics other than the count of users who log in at least once a month. The company has been taking aim at the 500 million visitors it estimates come to Twitter but don't sign in each month. It has been making more content visible to these occasional visitors, in hopes of coaxing them into returning more often and signing in. It has also been figuring out ways to make money from the eyeballs that see tweets outside of Twitter through deals with outsiders such as Flipboard and Yahoo Japan. It's unclear how much revenue these early efforts have generated.

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At the same time, Twitter has offered tools to make it easier for new users to decipher the 140-character public-messaging service, including a revamped private-chat function and an auto-feed for new users. Twitter has also said it is working on an initiative dubbed Project Lightning, tentatively due out this fall, that will curate tweets, photos and videos based on live events such as sports contests, awards shows and breaking news.

The biggest challenge for the next CEO will be to turn Twitter into a mass-market product. Co-founder Jack Dorsey, who is simultaneously running his digital payments startup Square, has stepped in as interim CEO. Ahead of an investor call, the company did not offer an update on the CEO search.

The San Francisco company's advertising business, which comprises the bulk of its revenue, is still working out the kinks with its direct-response ads. At the same time, it is benefiting from the shift of advertising dollars to mobile and social platforms. According to eMarketer, as much as 90% of Twitter's ad revenues will come from mobile devices in 2015, up from 84.6% in 2014.

(By Yoree Koh)

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