• TWTR up 24% ahead of Q2 report
  • Earnings and revenues projected to top estimates
  • Wall Street projecting Ad revenue growth
  • Focus on user base growth and monthly active users  

Twitter Inc. (NASDAQ: TWTR) is scheduled to report its second-quarter results on July 22, 2021, after market close. The expectation is high that the report will show continued growth in the social networking platform user base and revenue. The market also expects the report to show steady growth in monetizable daily active users.

The earnings report comes on the heels of the stock outperforming the broader market, rallying 24% year to date. While the stock is down by about 8% from all-time highs, it has outperformed the S&P 500, which is up by about 13%.

Twitter Inc chart

Additionally, the social networking company has made a slew of money-making initiatives to strengthen its competitive edge in the segment. It has already unveiled a live audio conversation feature, Twitter spaces, and a first-ever subscription offering Twitter Blue.

Q2 expectations

Twitter is poised to report Q2 numbers on posting a 20% year-over-year growth in monthly daily active users in the first quarter. Analysts believe the momentum continued in the second quarter, with the report expected to show a 10% jump in mDAU.

The company is projected to deliver revenues of $1.06 billion for its second quarter, representing a 54.5% year-over-year growth. The company, on its part, expects revenues to be between $980 million and $1.08 billion. Last year in the same quarter, the social networking giant reported revenues of $683.4 million.

Sales growth in Q2 will mostly be driven by a rise in ad impression pricing during the quarter. An increase in businesses looking to advertise in the aftermath of the opening of the economy is also believed to have benefited Twitter’s revenue base.

Twitter Inc price and EPS surprise

On the other hand, earnings are expected at 7 cents a share, indicating a 105.04% t year over year growth. However, the company is projecting an operating loss of between $120 million and $170 million compared to an operating loss of $124 million reported last year in the same quarter.

 In addition to the earnings report, Twitter is also expected to deliver third-quarter guidance. Currently, Wall Street expects the company to deliver revenues of $1.17 billion in Q3.

What to look out for

When Twitter reports, the focus will be on ads revenue, a key driver of the bottom line. The opening of the global economy is believed to have had a positive impact on the advertising base as more companies and businesses moved to advertise their offerings.

Conversely, Twitter’s ad revenue is expected to have recovered in the second quarter, mostly driven by an upswing in advertiser sentiments for ads. Wall Street expects Twitter to report a 64% increase in advertising revenues to highs of $922 million.

Twitter Ad portal visits

Additionally, the market will pay close attention to Twitter’s monetization efforts key to generating long-term value. In the recent past, the company has resorted to adding new features aimed at tackling abuses to attract and hold on to users. The efforts have had a positive impact, with user growth increasing 20% in each of the last six quarters on a year-over-year basis.

In addition, Twitter has introduced a new feature that lets content creators charge admission to their live audio chat rooms. The new feature is part of the company’s push to attract more content creators and monetize the platform.

Rising expenses should be a point of concern, especially if they weighed heavily on its profit margins.

Bottom line

While Twitter is up by more than 20% year to date, the outcome of the Q2 report could have a significant impact on its price action. In the aftermath of the Q1 report, the stock ended up tanking by more than 20%. Therefore, investors should be cautious as anything small that spooks the market could trigger a sell-off.