Is Jack Dorsey in Trouble After Twitter’s Earnings?

Twitter, Inc. (NYSE: TWTR) reported second quarter financial results after the markets closed on Tuesday. Despite mixed earnings, investors did not give Twitter the benefit of the doubt. There was a massive sell-off in the after-hours and it appears that the company is just not growing fast enough for investors. Is CEO Jack Dorsey in trouble after his one year anniversary? And will he head the way of Dick Costolo?

The company said that it had $0.13 in earnings per share (EPS) on $602 million in revenue. There were consensus estimates from Thomson Reuters that called for $0.10 in EPS on $606.77 million in revenue. The same period from last year had $0.07 in EPS on $502.38 million in revenue.

During the second quarter, advertising revenue totaled $535 million, an increase of 18% from last year year, with mobile advertising revenue making up 89% of total advertising revenue. At the same time, data licensing and other revenue totaled $67 million, an increase of 35% year-over-year.

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Average monthly active users (MAUs) totaled 313 million in the second quarter, which was an increase of 3% from last year, and barely up sequentially from 310 million. Mobile MAUs made up 82% of all MAUs.

Average U.S. MAUs totaled 66 million for the quarter up 1% from last year and up from 65 million sequentially, while average international MAUs were 247 million, up 4% from last year, and up from 245 million in the previous quarter.

Total ad engagements grew 226%, driven by the adoption of auto-play video and increased ad load. The average cost per engagement fell 64% year-over-year, again primarily due to the shift to auto-play video.

In terms of guidance for the third quarter, the company expects to have adjusted EBITDA in the range of $135 million to $150 million and for revenue to be in the range of $590 million to $610 million. There are consensus estimates that call for $0.11 in EPS on $678.18 million in revenue for the coming quarter.

On the books, cash, cash equivalents, and short-term investments totaled $3.59 billion at the end of the quarter, versus $3.49 billion at the end of 2015.

Shares of Twitter closed Tuesday down about 1% at $18.45, with a consensus analyst price target of $18.38 and a 52-week trading range of $13.73 to $36.67. Following the release of the earnings report, the stock was initially down about 10% at $16.59 in the after-hours trading session.

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