Twitter’s Q3 profit drops on higher costs and expenses

Twitter reported a 21.5 per cent drop in its third-quarter net profit on higher costs and expenses, despite a rise in revenue.

Net profit for the three months period ending September 30 slid to $28.65 million, the company said in a statement on Thursday. The total costs and expenses during the period rose 13 per cent year-on-year to $880m.

Revenue jumped 14 per cent to $936m with advertisement revenue rising 15 per cent to $808m.

"Advertisers significantly increased their investment on Twitter in the third-quarter, engaging our larger audience around the return of events as well as increased and previously delayed product launches," Ned Segal, Twitter's chief financial officer, said. "We remain confident that our larger audience, coupled with ongoing revenue product improvements, new events and product launches, and the positive advertiser response to the choices we've made as we have grown the service, can drive great outcomes over time."

The company reported 187 million daily users at the end of the quarter, an increase of 29 per cent from last year, but a paltry gain over the previous period. In the US, daily users during the third-quarter reached 36 million, up from 30 million during the same period last year.

“As we approach the US election, however, it is hard to predict how advertiser behaviour could change,” the company, said. “In the second quarter, many brands slowed or paused spend in reaction to US civil unrest, only to increase spend relatively quickly thereafter in an effort to catch up.”

The period surrounding the US election is somewhat uncertain, but “we have no reason to believe that September's revenue trends can't continue, or even improve, outside of the election-related window.”

“We remain confident that our larger audience coupled with ongoing revenue product improvements, new events and product launches, and the tendency of advertisers to respond positively to the choices we have made as we have grown the service, can drive great outcomes over time.”

Twitter is one of three internet companies under intense pressure from US officials over their treatment of political content. Its chief executive Jack Dorsey testified alongside the heads of Facebook and Google at a senate panel on Wednesday, according to Bloomberg.

“Twitter’s sales number was impressive; sales revenue soared by 14 per cent to $936m,” Naeem Aslam, chief market analyst at Avatrade, said. “Speculators who were looking for a drop of 5 per cent in the sales number are likely to face pain as the stock may attract new investors. However, the disappointing element was that the user growth wasn’t impressive, and this may trigger some profit-taking.”