Twitter profit sinks 18% after missing estimates

The company's fourth-quarter net profit dropped year-on-year to $181.69m although revenue rose by 21.5% during the period

Twitter's total revenue surged 21.5 per cent year-on-year to nearly $1.57 billion in three months to December 31. AP

Twitter reported an 18.2 per cent decrease in fourth-quarter net profit as the company missed analysts' estimates on sales and user growth.

The San Francisco-based microblogging site's net profit in the October-December period dropped to $181.69 million, compared to $222m in the same period in 2020. However, it was an improvement over the $536.75m loss that the firm suffered in the third quarter of 2021.

The company’s total revenue surged 21.5 per cent year-on-year to about $1.57 billion in the three months to December 31, missing analysts' estimate of $1.58bn as compiled by Refinitiv.

Twitter’s net loss for the 2021 financial year narrowed to $221.4m compared to the $1.14bn loss it posted in 2020. That was on the back of improved revenue, which rose 37 per cent on an annual basis to more than $5bn last year.

“Our strong 2021 performance positions us to improve execution and deliver on our 2023 goals,” Twitter chief executive Parag Agrawal said.

“We are more focused and better organised to deliver improved personalisation and selection for our audience, partners and advertisers,” Mr Agrawal said.

This is the first earnings report by Twitter under Mr Agrawal after Jack Dorsey stepped down from the role in November. Mr Agrawal previously served as the chief technology officer of the company.

Advertising sales contributed about 90 per cent to the company’s total revenue, surging 22 per cent on an annual basis to $1.41bn in the last quarter.

Total advertising engagements in the last quarter decreased 12 per cent yearly, while the cost per engagement rose 39 per cent year-on-year, Twitter said.

The company earned $154m from data licensing and other revenue streams in the previous quarter, up 15 per cent compared with the same period in 2020.

Its revenue from the US market reached $885m, an increase of 21 per cent on an annual basis, while it earned $683m from international markets, a yearly increase of 23 per cent.

Twitter also reported a spike in the number of monetisable daily active users, with average numbers reaching 217 million in the fourth quarter, compared with 192 million in the same period of 2020 and 211 million in the third quarter. However, it missed the 218.6 million mark expected by analysts, StreetAccount reported.

“Twitter had a solid fourth quarter to finish 2021,” the company’s chief financial officer Ned Segal said.

“There are no changes to our goals of 315 million average monetisable daily active users in Q4 2023 and $7.5bn or more revenue in 2023. Our increased focus on performance ads and the SMB opportunity after the sale of MoPub positions us even better for 2022 and beyond,” said Mr Segal.

On January 1, Twitter closed the sale of its MoPub business to AppLovin for $1.05bn. The sale of MoPub enables it to concentrate more on performance-based advertising, SMB offerings and other commerce initiatives, Twitter said.

The company’s board of directors has authorised a new $4bn share repurchase programme. It is effective immediately and replaces the previously approved $2bn programme from last year, of which almost $819m remained.

“As part of the new programme, we intend to enter into a $2bn accelerated share repurchase and repurchase the remaining $2bn over time,” Twitter said.

The company’s fourth-quarter capital expenditures totalled $138m, an annual drop of more than 52 per cent. Its total costs and expenses rose almost 35 per cent to $1.40bn in the last quarter.

A significant portion of capex in the last two years was driven by the “buildout of our new data centre, which is largely complete and has begun to serve traffic”, Twitter said.

In its guidance for the current quarter ending on March 31, Twitter expects to earn revenue between $1.17m and $1.27bn. Analysts were expecting $1.26bn on average, Refinitiv reported.

The company predicts capital expenditure in the range of $900m to $950m in the 2022 financial year.

“Our monetisation strategy is designed to help advertisers achieve their goals at every stage of the marketing funnel — from awareness and consideration, all the way through to conversion,” the company said in a letter to its shareholders.

“Increasing our share in the digital ads market, and in performance advertising in particular, in 2022 and beyond will be the tangible measure of our success.”