Generally it’s the megatechs that gather all the publicity in the markets from new products, services, controversies, outspoken CEOs, sales and earnings, but on Thursday two of the lesser lights – Twitter and Snap – stepped up to the plate and whacked a couple of home runs.
The reporting season from the big techs started weakly this week with Netflix producing lacklustre subscriber figures and forecasts.
Next week the other members of FAANG group – Apple, Amazon, Alphabet (Google) and Facebook – get their chance to generate the drive to save the reporting season, hopefully helped by the ex-officio member, Microsoft.
While any one of these giants could do it, they will have to be pretty sharp to standout against the quarterlies from Snap and Twitter.
To the surprise of Wall Street, Twitter easily topped market forecasts in the second quarter despite a slight downturn in users compared with the previous quarter.
Total revenue of $US1.19 billion and earnings of $US65.4 million (against a loss of more than $US1.3 billion in the June, 2020 quarter) were well ahead of expectations.
The company’s key metric – its daily active user base was 206 million as of the June 30 end of the quarter, down a million from the previous quarter but up 11% from the year-ago period when Donald Trump was an active user and abuser of the service.
The fall from the March quarter was due to the slowdown in the pace of news with Trump banned and fading from Twitter in the aftermath of the January 6 assault on the US Capitol building.
More importantly advertising revenue surged 87% to $US1.05 billion in the quarter compared with year-ago levels, blowing away forecasts.
That’s the sort of performance that Apple, Facebook and Google will be hard pressed to match at any time and perhaps a real indicator of the true impact of the banning of Trump. Advertisers return to or flocked to the service that was freed of the toxicity of Trump and his divisiveness.
Twitter said it will step up its investment on the revenue generating side and now expects its total expenses and headcount to rise 30% in 2021, up from prior guidance of 25%.
Investors were unworried by the higher costs forecast (usually they freak), boosting Twitter shares by 5% in after-hours trading.
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For Snapchat parent, Snap, a similar surprise on the upside which sent the shares more than 16% higher in after-hours trading. The surprise came as a complete shock – Snap shares had fallen by just under 1% in regular trading – as investors discounted the quarterly report’s outperformance.
Daily active users hit 293 million in the June quarter — up 23% or 55 million from the June 2020 quarter in a big surprise because Snap was supposed to be roadkill in the wake of the rise of Tik Tock and the efforts of Facebook to keep Instagram relevant.
Snap’s daily active users also rose 13 million from the March quarter’s 280 million. The company also reported higher use of products such as Spotlight.
Snap’s revenue soared 116% to $US982 million while net losses narrowed by 53% to $US152 million.
The company lives on advertising and Snap had more upbeat news – it sees revenue growing an estimated 58% to 60% in the current third quarter year-on-year.
Our second quarter results reflect the broad-based strength of our business, as we grew both revenue and daily active users at the highest rates we have achieved in the past four years,” CEO Evan Spiegel said in the earnings report’s commentary.
If the 16% after-hours rise in the share price is sustained in Friday trading, the value of Snap will have topped $US100 billion for the first time. If Twitter’s 5% rise is sustained, its value will top $58 billion.
