Twitter is embroiled in a fierce legal battle with Elon Musk as he tries to back away from the company’s $44 billion acquisition. It has slowed its hiring as it grapples with a flagging economy. Its share price has declined.
On Friday, Twitter revealed the damage caused by those challenges. In an earnings report, the company said its business had suffered, along with macroeconomic troubles, due to uncertainty caused by Mr. Musk. Twitter’s quarterly revenue declined for the first time since 2020 as it struggled to become a destination for advertisers and came in at a net loss.
The weak earnings report has intensified the blame game between Twitter and Mr Musk, who blamed and exposed the company’s lack of business and financial prospects as a back-and-forth to buy the social media service. Mr Musk, who also leads electric car maker Tesla, in April agreed to buy Twitter and said he would take it private. He told investors privately that he could grow the company’s revenue five-fold by 2028 and expand it to 931 million users in the same year.
But as the stock market plunged, dragging down Tesla shares – which is his main source of wealth and lost a third of its value this year – Mr. Musk made increasingly prickly comments about Twitter. Did it? This month, he moved to close the deal. Twitter has since sued it to complete the purchase, and a five-day trial is scheduled for October in Delaware Chancery Court to decide the matter.
Mike Proulx, a research director at Forrester, said, “Twitter now has an acronym that no longer wants it, it has a CEO and a board that wants to get rid of it, and an employee base that’s stuck between ” “None of this is good for Twitter.”
In its earnings statement, Twitter attributed the disappointing results to “advertising industry heads of state uncertainty related to the macroenvironment as well as the pending acquisition of Twitter by an associate of Elon Musk.”
Overall, revenue for the second quarter was $1.18 billion, down 1 percent from a year ago, which was a far cry from the 20 percent growth once predicted for that year. Twitter’s revenue fell 2 percent from the first to second quarter, which roughly coincides with the period just before and after Mr Musk stepped down.
The company’s net loss was $270 million, a big swing from a year-ago profit of $66 million, as costs and expenses increased.
There was a bright spot. Twitter said it had 237.8 million daily active users who saw the ads, a nearly 17 percent increase from a year ago.
Mr Musk did not respond to a request for comment.
In recent months, Twitter and other social media companies have faced a gloomy advertising market. The economic downturn and fears of war in Ukraine have reduced the advertising spending on which social media companies rely for most of their revenue.
Snapchat maker Snap on Thursday reported its slowest rate of quarterly growth and widespread losses. Shares of Snap fell 39 percent on Friday, pushing its market capitalization below $17 billion.
Twitter and Snap’s earnings could be bad for other Internet firms that rely on advertising for the bulk of their earnings. Facebook’s parent company Meta and Google have reported earnings next week.
Twitter faces additional concerns from advertisers about a possible takeover by Mr. Musk, who has said he hates advertising and wants to relax Twitter’s content moderation policies, which allowed ads to be displayed with offensive content. prevented from happening.
Twitter chief executive Parag Agarwal has told employees the company has not lived up to its potential and cut costs, fired top executives and told employees to ignore Mr. Musk’s fireworks in recent months Is.
Still, the economic headwind detailed by Twitter on Friday may not be a major concern for current shareholders if a court forces Mr. Musk to take ownership of the company at a proposed price of $54.20 per share, Rich co-founder of Greenfield, said. Lightshade Partners, a research firm.
“The funny thing is, earnings don’t matter,” he said. “At the end of the day, if they sell the company for $54.20, that’s Elon’s problem, not a market problem.”
Twitter’s share price was $51.70 on April 25, the day the company’s board accepted Mr. Musk’s offer. But the stock has largely gone downhill since spending below $40 last month. Its shares fell less than 1 per cent in early trading on Friday but were up about 1 per cent.
Mr Greenfield said investors would worry about Twitter’s revenue only if the deal fails and the company’s business fundamentals regain their importance. “If the deal breaks down completely, we know the stock will go down,” he said. “But the question is, ‘How much?'”
Mr Musk has also accused Twitter of misleading investors and undermining unauthorized accounts on his platform. The company has said those accounts account for less than 5 percent of active users on its platform and that it uses experts to audit its count. Twitter reiterated this figure in a Friday filing.
As her fight with Mr Musk came to the fore, Twitter tried to avoid the limelight. For the second quarter in a row, the company declined to hold earnings calls with Wall Street analysts, dodging uncomfortable questions about Musk’s impact on the business that may have been raised.
“The company is extremely calm,” said Mr. Greenfield. “It’s been several months since any investor had any talks with the company.”
Mr Musk also faces business concerns at Tesla. The carmaker reported Wednesday that its quarterly profit had fallen due to supply chain delays and the price of bitcoin that the company had invested in.