Twitter, Inc. Earnings: What to Watch

Twitter, Inc. Earnings: What to Watch

Twitter (NYSE:TWTR) is set to report its second-quarter earnings on July 27, just one day after social-network juggernaut Facebook (NASDAQ:FB). Twitter recently blamed its revenue headwinds on increasing competition for digital ad spending, as well as Twitter's move to reprioritize its revenue products. As far as how Twitter's overhaul of its revenue products is negatively impacting revenue, management has said that the move includes the elimination of some revenue drivers. Twitter management didn't provide revenue guidance for its second quarter, but analysts expect revenue headwinds to persist. On average, analysts expect Twitter to report second-quarter revenue of $548 million, down about 9% year over year from $602 million in the year-ago quarter. It's no surprise that analysts expect another quarter of declining revenue in Q2. But if management is right about the way things will unfold, Twitter's recent user growth could provide a preview of the growth management expects in the future: Twitter management has said its return to user growth will drive revenue growth. When Twitter reports its second-quarter results, investors should look to see if management provides more specific insight into management's outlook for revenue. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Twitter wasn't one of them!

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Twitter (NYSE:TWTR) is set to report its second-quarter earnings on July 27, just one day after social-network juggernaut Facebook (NASDAQ:FB). Important questions loom ahead of the release: Will Twitter’s recent return to user growth persist? Can Twitter charge high-enough premiums for its ads in a Facebook-dominated digital ad market?

But one hot topic — Twitter’s revenue headwinds — will likely rise above these lingering concerns when the company reports second-quarter results. Here’s why investors should check on Twitter’s revenue, and look for insight into what to expect from the key metric going forward.

Twitter headquarters
Twitter headquarters. Image source: Twitter.

Declining revenue

Twitter’s recent revenue trajectory is worrying. After decelerating substantially in 2016, Twitter’s year-over-year revenue-growth rate officially turned negative in the first quarter of 2017. Revenue was down 8% year over year. Twitter recently blamed its revenue headwinds on increasing competition for digital ad spending, as well as Twitter’s move to reprioritize its revenue products.

TWTR Revenue (Quarterly YoY Growth) Chart
TWTR Revenue (Quarterly YoY Growth) data by YCharts

Facebook is likely a primary culprit in the more competitive digital-advertising space that Twitter cites. Facebook’s advertising revenue has been skyrocketing, up 51% year over year in the social-network’s most recent quarter. This soaring ad revenue comes as Facebook continues to push its video-first strategy.

As far as how Twitter’s overhaul of its revenue products is negatively impacting revenue, management has said that the move includes the elimination of some revenue drivers….

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