Twitter announced its second quarter results on Friday, 22 July, showing an unexpected dip in revenue and a net loss of $270 million. The company blamed this on its legal tussle with Tesla CEO Elon Musk as well as a weakening market for advertising.
It also said that expenses related to the Musk deal were about $33 million during 2022's second quarter.
"Q2 revenue totaled $1.18 billion, a decrease of 1 percent year-over-year... reflecting advertising industry headwinds associated with the macro-environment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk," the company said.
Twitter decided not to host an earnings call, issue a shareholder letter, or provide financial guidance regarding its second quarter earnings, due to Elon Musk's pending acquisition.
Twitter's 'Unenviable Position'
Twitter's advertising revenue rose just 2 percent to $1.08 billion, significantly below analyst expectations of $1.22 billion, according to Refinitiv IBES data accessed by Reuters.
"Twitter is now in the unenviable position of convincing advertisers that its ad business is solid regardless of how its court battle with Musk ends, and its Q2 earnings show that the platform has its work cut out for it to do that," Jasmine Enberg from Insider Intelligence told the agency.
Twitter also expressed uncertainty about when the merger was expected to close.
Meanwhile, the company's costs and expenses jumped 31 percent. It said that expenses related to the Musk deal were about $33 million during this quarter, while severance-related costs were $19 million.
A Delaware court last week ruled that Twitter's case against Elon Musk for terminating his $44 billion acquisition of the platform will go to trial in October this year.
Twitter appears to have the upper hand going into this trial.
The judge presiding over the case, Kathaleen McCormick, has a record of siding with the sellers and has previously forced a buyer to follow through with their acquisition in a similar case.
Ad Revenue Dries Up
The pandemic was very lucrative for Big Tech.
In 2020, for the very first time, Google, Meta, and Amazon earned more than half of the total ad revenue generated in the US. However, the gradual waning of the pandemic has put a dampener on things.
Apart from the lifting of lockdowns, Russia's invasion of Ukraine, a certain software update by Apple and increased competition from Tiktok have also pressured the three giants to re-evaluate their spending.
Twitter, and other tech companies have felt the pressure since the beginning of the year, with massive drops in share prices.
Last week Snap, the owner of social media platform Snapchat, which also relies on advertising revenue, saw its shares slump by more than 25 percent after it missed revenue expectations.