Please ensure Javascript is enabled for purposes of website accessibility

Weibo's Second-Quarter Earnings Fell 26%

By Anders Bylund - Updated Aug 23, 2019 at 9:55AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The "Twitter of China" added 21 million users in the quarter, but ad fees are dropping amid heavy competition.

Social media specialist Weibo (WB 0.00%) reported second-quarter results earlier this week. The so-called "Twitter of China" posted solid user growth but relatively flat revenue, resulting in lower earnings as the fixed cost structure underlying its services continued to expand.

Here's a closer look at this international tech stock's latest report.

Weibo's second-quarter results: The raw numbers

Metric

Q2 2019

Q2 2018

Change (Decline)

Revenue

$432 million

$427 million

1.2%

Net income attributable to Weibo

$103 million

$141 million

(27%)

GAAP earnings per share (diluted)

$0.46

$0.62

(26%)

Data source: Weibo. GAAP = generally accepted accounting principles.

What happened with Weibo this quarter?

  • It added 21 million active monthly users, landing at 486 million accounts. That's a 13% increase over the year-ago period's 431 million active users.
  • CEO Gaofei Wang expected limited sales growth in this period as the Chinese market for online advertising is going through a period of intense pricing pressure. That worked out as predicted, pairing Weibo's rising user numbers with modestly lower revenue per user. In the end, top-line revenue was exactly in line with management's sales guidance.
  • 94% of Weibo's monthly users accessed its services at least partly through mobile apps. That ratio stood at 93% a year ago and 89% in the second quarter of 2016.
Weibo's corporate logo, featuring a stylized version of a tweeting bird.

Weibo's corporate logo. Image source: Weibo.

What management had to say

In the earnings call, Wang noted that the Chinese market for online advertising still labors under a supply-and-demand imbalance where ad spots are plentiful and average ad prices are trending lower. The company is taking steps to adjust to this uncomfortable situation.

"As such, while maintaining sufficient ad inventory to offer, we will still have to mitigate the changes on the demand side," Wang said. "In such a scenario, we will have to go through a transitional period with structural changes on our customer composition, as well as the comprehensive optimization on ad products to gradually earn recognition from more customers and thus meaningfully impact our top-line growth."

Looking ahead

Weibo's management expects a constant-currency revenue growth of roughly 7.5% in the third quarter. Given the dollar-to-yuan exchange rate trends over the last year, that should work out to a relatively flat year-over-year comparison as measured in dollars. The year-ago top-line tally stopped at $460 million.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Weibo Corporation Stock Quote
Weibo Corporation
WB
$21.50 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.