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Twitter Reports Zero Subscriber Growth in Q2, Stock Takes Dive

Average monthly active users in U.S. decline by 2 million in the quarter

Twitter shares were down more than 9% in pre-market trading after the social company reported that its average monthly user base in the second quarter remained unchanged — at 328 million — from Q1.

In fact, in the U.S., Twitter’s monthly user base decreased by 2 million in the quarter, declining to an average of 68 million for Q2. The company cited “lower seasonal benefits and other factors” for the poor showing on the monthly user metrics.

Asked for more detail about the lack of MAU sequential growth, COO Anthony Noto said on the company’s earnings call Thursday, “We don’t have data that would explain that.” He added that Twitter is assuming it’s due to “exogenous factors,” such as fewer events in the second quarter.

Second-quarter revenue totaled $574 million, down 5% year-over-year but topping Wall Street’s forecast of $537 million in revenue. It reported adjusted earnings per share of 8 cents, beating analysts estimates of 5 cents per share. Ad revenue totaled $489 million, down 8% from the year-earlier quarter.

After boosting its monthly user base by 9 million in the first three months of the year, Twitter’s MAUs remained unchanged in Q2 (but increased 5% from the year prior). Analysts had expected it to gain 4 million sequentially.

According to Twitter, the number of total daily active users grew 12% year-over-year, the third straight quarter of double-digit growth on the metric. However, the company doesn’t disclose the actual number of daily users.

“Sequentially, monthly active users were flat and daily active user growth decelerated,” CFRA Research’s Scott Kessler wrote in a research note, reiterating his “sell” rating on the stock. “We still see Twitter as overvalued.”

Twitter chief Jack Dorsey, in announcing the results, insisted the company was “strengthening our execution, which gives us confidence that our product improvements will continue to contribute to meaningful increases in daily active usage.”

The company also touted the expansion of its live-video strategy. In Q2, it delivered more than 1,200 hours of live premium video, up from 900 hours in Q1 and double the 600 hours it pumped out in Q4. Twitter’s 625 live video events reached 55 million unique viewers, an increase of 22% sequentially from the first quarter.

More live video is coming later in 2017, including Stadium, a live collegiate sports channel, and a 24-hour news channel in partnership with Bloomberg. In Q2, it inked a pact with Roku to make Twitter programming Roku users in the U.S., adding to its current distribution on platforms including Apple TV, Amazon Fire TV and Microsoft Xbox.

“Ultimately the value we’re going to drive… is serving these audiences on Twitter” that are underserved in specific categories, Noto told investors on the earnings call.

Another strategic priority for Twitter is reducing abuse and harassment on the service. Last week, the company said it is now taking action on 10 times the number of abusive accounts daily compared with a year ago, and is limiting account functionality or suspending thousands more abusive accounts each day. “People are reporting significantly less abuse on Twitter today than they were six months ago,” Dorsey said on the earnings call.

Twitter remains unprofitable — the company has never posted a net profit. On a standard accounting basis, it reported a net loss of $116.5 million for Q2 of 2017, up from $107 million in the year-ago quarter. The loss for the most recent quarter included $113 million in stock-based compensation as well as a $55 million one-time charge for impairments in Twitter investments in privately held companies.

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