Twitter Earnings Preview: Revenue Likely To Decline, Though MAUs Might Improve
Twitter (NYSE:TWTR) is set to report its Q2 2017 earnings on Wednesday, July 27. Twitter’s struggle to monetize its active user base has been the one of the chief investor concerns for the past two years, and the company’s management (led by Jack Dorsey) has been largely unable to assuage these concerns. While the company has added features such as in-stream video ads to improve its monetization, they have so far failed to deliver significant results, as was in the case in Q1 when revenue declined by 8%.
In the upcoming Q2 results, we expect Twitter’s management to provide more color on the company’s strategy to tide over the aforementioned issues. Specifically, we expect the company to announce more measures to monetize its platform. We also expect management to shed light on its revenue expectations from live streaming and Periscope going forward. However, we expect that monthly active users (MAUs) for the company will grow as it improves user engagement through live streaming content.
We expect Q2 2017 revenue to be between $530 -$560 million, against $548 million reported in the prior year quarter. Twitter expects adjusted EBITDA to range between $95 – $115 million, significantly lower than its Q2 2016 figure of $175 million.
Revenue Per User To Remain Low
Twitter’s struggle to grow its active user base has been the primary investor concern for several quarters now. However, this trend reversed in Q1 as Twitter’s average monthly active users (MAUs) grew 6% y-o-y to 328 million. As the company is redirecting its focus from user expansion to revenue and profit generation, the appropriate metric in focus is likely to become revenue-per-user going forward. The company’s monthly revenue per user declined to 56 cents in Q1. The company has stated that it will continue to face revenue headwinds even though MAUs will increase. This implies that ARPU is expected to decline in Q2 considering total revenue is expected to fall from the prior year quarter.
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