With shares of Twitter (TWTR) soaring nearly 130% over the past 12 months, investors will be watching the social network's second-quarter earnings report closely. Can the tech company impress investors once again? Those interested in checking on Twitter's recent business performance should mark their calendar for July 22, when the company will report its second-quarter results.
Twitter has been executing extremely well recently, growing both active users and revenue rapidly. With such strong growth in the rearview mirror, expectations are unsurprisingly high going into Twitter's second-quarter update. By the same token, an easy top-line year-ago comparison due to a pullback in advertising spend in the second quarter of 2020 means analysts are modeling for exceptionally high revenue growth this quarter.
Here's a closer look at what to expect from Twitter's second-quarter earnings report.
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1. Look for 50%-plus revenue growth
Without any good context, an investor might be baffled by analysts' consensus forecast for Twitter's second-quarter revenue. On average, analysts are expecting the tech giant to grow its revenue by 50.7% year over year.
But why, exactly, are analysts modeling for such rapid growth? After all, Twitter's revenue grew by 28% year over year for the past two quarters. It boils down to the fact that Twitter has an easy year-ago comparison, when total revenue declined 19% year over year amid reduced advertiser spend as many consumers were staying at home during the second quarter of 2020.
Given the stock's recent sharp rise, Wall Street is likely hoping Twitter can beat analysts' estimates. So Twitter will likely need to grow its revenue by 51% year over year or more to impress investors.
2. User growth may slow
While Twitter's revenue growth will likely accelerate in Q2, the company's user growth may slow. Though the social network has an easy revenue comparison, it has a tough user growth comparison. As consumers looked for ways to stay entertained at home during the second quarter of 2020, Twitter's monetizable daily active users soared 34% year over year. Further, growth has decelerated as the economy reopens. Third-quarter 2020 users rose 29% year over year. This was followed by 27% and 20% year-over-year growth in these daily users in the fourth quarter of 2020 and the first quarter of 2021, respectively.
Of course, it's difficult to gauge exactly how much the metric might decelerate if it does. But a meaningful deceleration in the key metric (perhaps one that brings the year-over-year growth rate to levels closer to 10%) shouldn't surprise investors.
Twitter reports its second-quarter results after market close on Thursday, July 22.
