On Thursday, Twitter Inc (TWTR.N) revealed lower-than-expected quarterly advertising income and user growth, as well as revenue forecasts that fell short of Wall Street projections, signaling that the social networking site’s turnaround plan has yet to bear fruit.
Nonetheless, Twitter stated that it has made “significant progress” toward its goal of 315 million users and $7.5 billion in annual revenue by the end of 2023 and that user growth in the United States and overseas should increase this year.
To break out of a protracted period of stagnation and attract new users and advertisers, Twitter has been working on large projects such as audio chat rooms and newsletters. However, the quarterly results cast doubt on Twitter’s strategy, as analysts had anticipated faster evidence of growth.
According to IBES data from Refinitiv, monetizable daily active users, or users who view advertising, increased 13% to 217 million in the fourth quarter ended Dec. 31, missing average projections of 218.5 million. This was an increase from the previous quarter’s 211 million users.
In addition to the $2 billion in buybacks allowed in 2020, Twitter launched a fresh $4 billion share repurchase program. In premarket trading, the company’s stock was up 4%.
“Twitter’s stock buyback plan is helping investors overlook the company’s relatively weak results and outlook,” said Jesse Cohen, senior analyst at Investing.com.
“Twitter will need to keep up similar momentum in 2022, but the path forward is clear,” said Jasmine Enberg, principal analyst at Insider Intelligence.
Advertising revenue increased 22% year over year to $1.41 billion, falling short of analysts’ expectations of $1.43 billion.
The company expects overall revenue of $1.17 billion to $1.27 billion in the first quarter. The range’s midpoint is less than Wall Street’s consensus projection of $1.26 billion.
In an interview, Twitter’s Chief Financial Officer Ned Segal said that user growth was in line with the company’s expectations for the previous quarter and that the company was working to increase user activity by encouraging people to follow topics they were interested in during the sign-up process.
He went on to say that advertising demand was not as robust in the fourth quarter’s final weeks as it had been at the start of the holiday season.
The quarterly results are the first since Chief Executive Parag Agrawal took the helm in November. His appointment, after co-founder Jack Dorsey stepped down as CEO, signaled an increased focus on engineering and incorporating cryptocurrencies and blockchain technologies.
The new buybacks demonstrate the company’s “confidence in our execution and our strategy,” said Segal.
“The company certainly seems to be going in a different direction under the leadership of new CEO Parag Agrawal as it takes steps to return cash to shareholders in the form of higher buybacks,” Cohen said.
Total ad engagements, which include clicks, decreased 12%. That was due in part to a shift toward video ads and other formats that generally receive less engagement from users but are more expensive, and profitable, for Twitter. The cost of each ad engagement rose 39%.
Apple Inc (AAPL.Oprivacy )’s improvements had a minor impact, according to the company. Apple began requiring developers to obtain permission from iOS users to track their activities on third-party apps and websites last year.
According to Segal, the Apple adjustments could have an impact on Twitter in the future as it expands its performance advertising business, which refers to ads that aim to promote sales or other consumer activities. He stated that Twitter is attempting to reduce the negative effects of Apple’s actions in the future.
“We’re delighted with the progress we’ve made,” he continued, “but we still have work to do here.”
Twitter reported a 22 percent increase in fourth-quarter overall income, which includes money received from data licencing, to $1.57 billion, in line with analyst expectations.
Revenue growth for the full year 2022 is estimated to be in the low-to-mid-20% range. Total cost and expense growth in 2022 is estimated to be in the mid-20% range compared to last year, according to the company.
