- Twitter expects to come in below predicted revenue.
- Twitter has officially pulled its guidance for the first quarter of 2020.
- Other tech companies also predict 'below than usual revenue'.
The outbreak of the coronavirus has impacted the global economy. Talking about its economic impact on tech companies, Twitter has also been hit hard and expects an operating loss in the first quarter of 2020. Twitter's Financial Release explains that despite gaining 12 million more active users in the first three months of 2020, the micro-blogging platform will not be able to generate the expected revenue and will incur an operating loss for the period.
Twitter’s guidance for the period predicts the total revenue to be between $825 and $885 million which was $1.01 billion in the last quarter of 2019. The said guidance also predicts the operating income for the quarter to be between break-even and $30 million. As the impact of the coronavirus is evolving rapidly, health officials from all over the world have advised people to stay home and practice social distancing. The virus has infected 392,780 people globally and 17,159 people have been reported dead according to data Johns Hopkins University's Tracker. The governments have imposed lockdowns in the worst affected areas until the situation is under control. Many businesses are closed down during the pandemic which means there will be fewer advertisers. This results in decreased ad revenue of Twitter although the company has gained 12 million users in the first quarter of 2020. According to Ned Segal, Chief financial officer at Twitter, the company had a strong start to the year until the outbreak of the coronavirus which impacted the global economy resulting in the significantly decreased ad revenue of the company. Twitter reported that it expects the first-quarter profit to be slightly down year-earlier period in which the company reported sales of $787 million.
Jack Dorsey, CEO Twitter said that although there is a huge increase in Twitter users in the first quarter of 2020, these users are not enough to maintain the Twitter revenue between $825 and $885 million. The company boasts 164 million daily active users while it was 152 million and 134 million in the last and first quarter of 2019, respectively. It is expected that the company will report its first-quarter earnings on April 30, 2020. Twitter also withdrew its full-year perspective for equity compensation, expenditures, and capital expenses.
An activist investor Elliott Management Corp. bought 4% of Twitter for $1 billion before some weeks of the financial downfall. Elliot wanted to leverage its interest but after a constructive exchange of views between the two companies, it was decided to keep him on board and Silver Lake, a private-equity firm to invest $1 billion in the company. Now, Elliot and Silver Lake together own 8% of the Twitter.
The company’s share price closed at $24.69 on Monday and the price rose to $24.90 in the after-hours session.
Twitter is not the only company to expect a drop in its revenue due to the coronavirus. Other tech giants like Apple and Microsoft have also downgraded their revenue expectations.
Photo: GLENN CHAPMAN via Getty Images
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