Twitter's earnings in Q3 outperformed the expectations of analysts in terms of revenue and per share earnings, as Twitter shared its report. There was an increase in the company's total revenue over the last quarter.
Compared with the figure generated in Q3 last year, the revenue generated from advertisements increased by 15% as it totaled $808 million, whereas that of last year, 2019 was $702 million. Twitter's Chief Financial Officer, Ned Segal, credits the increased investment of advertisers on Twitter with this positive outcome.
He said, “Advertisers significantly increased their investment on Twitter in Q3, engaging our larger audience around the return of events as well as increased and previously delayed product launches.”
The ad-generated revenue grew by 44%, compared to the previous quarter of $561 million.
A large part of the advertisement revenue for the quarter came from the United States. While $380 was generated internationally, the remaining $422 million was generated from the US. The implication of this is that the US still remains Twitter’s largest market in terms of advertisements, with over 50% of revenue coming from there alone.
$127 million was generated from data licensing and other sources, besides the revenue generated from advertising, bringing the total revenue reported by Twitter to $936 million for Q3.
With the $936 revenue generated, Twitter outperforms Refinitiv’s prediction, as the Financial market data provider had predicted that Twitter would record $777 million.
Net income drops
As the revenue for the quarter increased, there was also a corresponding increase in the costs and expenses incurred by Twitter. $880 million was spent on costs and expenses, which is a 13% increase compared with the $779 million that was incurred in the same quarter in 2019.
This puts the operating income at $56 million, and gave the company a 6% operating margin, which is a slight increase from the 5% margin in Q3 2019.
$29 million is the net income for the company and reports a fall from the $37 million which the company recorded in the previous year.
Number of monetizable users not growing fast enough
Twitter, undermining the increase in revenue generated, did not actually record a remarkable increase in the number of users that could be monetized. The number of monetizable daily active users had been anticipated by Analysts from Factset to rise to 195 million over the Q3, but only 187 million was recorded by Twitter.
This is a minor increase of 1 million from its Q2 report of 186 million mDAUs. Twitter’s mDAUs grew by 29% year over year, compared to the number from Q3 2019.
The mDAUs did not increase in the US from the 36 million recorded in Q2 2020 while there was an increase by 1% in the number of monetizable users from other parts of the world from 150 million in Q2 2020 to 152 million in the Q3. This brings to 187 million (the difference in net figures is as a result of rounding up of numbers), the total number of mDAUS.
There was a drop in Twitter’s shares by about 15% in after-market trading after its report delivered below what was actually expected on the mDAUs.
According to the company more people engaged with its ads in Q3, with a growth in the total ad engagement by 27% year over year compared to Q3 2019. It warned that it is hard to predict the advertiser behaviour because of the upcoming US elections but says it sees no reason why the revenue trends of September can’t continue.
As more people become engaged in major trends, it is most likely that there will also be an increase in the use of twitter for advertisements and thus a resultant increase in Twitter's ads revenue. The company seems determined to continue pushing for more positive financial outcome and is quite optimistic about it, which is very essential to keep the drive for actualizing its objectives despite the surrounding constraints. Businesses are increasing their presence online as they aim to expand their network of customers and places like Twitter and Facebook are part of the best place look. This will of course, mean an increase in the Twitter's number of monetizable users.