Why Twitter’s Revenues Will Remain Under Pressure In Q4, But Will Jump Next Year

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TWTR: Twitter logo
TWTR
Twitter

Twitter’s (NYSE:TWTR) management highlighted how a product malfunction and unusually low demand in July and August were the key reasons why the company missed Q3 revenue expectations. While the product malfunction meaningfully hurt the top line as it led to lack of data for advertising, we believe that the bigger factor was the low demand – something we attribute to the lack of many major events in the quarter. We detail trends in Twitter’s Revenues over the years along with our forecast for 2019 and 2020 in an interactive dashboard.

Although Twitter stock tanked over 20% (from around $40 before the earnings announcement to its current level of under $30), we think the markets are overlooking the company’s core strength of a virtual ‘king-maker’. The growth in the company’s user engagement, coupled with its reach make it an indispensable platform to be on for influencers as well as their fans. We also think that Q4 is likely to witness some weakness again due to lack of sufficient events. However, 2020 could be a bumper year for the company with the focus on Presidential election. After all, Twitter benefits from the transactions around an event and not necessarily the spend, and political ads continue to be a focal monitoring area for Twitter.

A Quick Look At Twitter’s Revenues

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Twitter makes money from online advertising and from licensing of data. The company reported total revenues of $3 billion in 2018 and reported in two segments:

  • U.S. ($1.6 billion 2018 revenue, contributed 54% to total revenue): Segment revenue is derived from Twitter’s U.S. business.
  • International ($1.4 billion 2018 revenue, contributed 46% to total revenue): Segment revenue is derived from Twitter’s International business.

Twitter’s Operating Trends Over Recent Years, And Our Expectations For 2019

  • Twitter’s Revenues reached $3.04 billion in 2018 from $2.53 billion in 2016. The change of $0.51 billion between 2016-18 implied an annualized rate of 9.7%. We expect 2019 revenue to reach $3.32 billion (9% y-o-y).
    • U.S. Revenue has largely remained around $1.6 billion over recent years. We expect the figure to cross $1.7 billion in 2019.
    • International Revenue has grown by more than 20% annually over 2016-18. We expect growth rate to be almost 15% for the year – helping these revenues reach $1.6 billion for full-year 2019.

Additional details about what Twitter’s U.S. and International revenues are likely to be in 2020 are available in our interactive dashboard.

 

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