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Wall Street thinks Twitter’s business is getting smaller and smaller.
Twitter failed to grow revenue year over year for the first time ever last quarter, and Wall Street expects Twitter will share a similar story on Thursday when it reports Q2 earnings.
Analysts expect Twitter to report revenue of roughly $537 million, or almost 11 percent lower than the same quarter last year. Twitter reported an 8 percent decline in revenue in Q1, which was actually better than expected.
Obviously, a shrinking business is not good. The company has been vocal about the fact that its business struggles are the result of almost two years of stagnant user growth finally catching up to the company. It just took a few years for Twitter’s business slowdown to match its user slowdown.
But that thinking also explains why Twitter stock actually jumped last quarter despite its shrinking business. The company added nine million new users in the quarter, the most new users added in a single quarter since early 2015.
If investors truly believe that Twitter’s revenue is correlated with its user growth, just lagging a few years behind, then Twitter could still save itself by reporting another bump in user growth in Q2. Our business may not be growing now, but it will be again down the line.
The question is whether or not Twitter can actually replicate what it did last quarter on the user side. That nine million user jump seemingly came out of nowhere, and it seems as though some of it was due to President Donald Trump and his incessant tweeting. Analysts are looking for about four million new users in Q2, a smaller quarter-over-quarter jump than Q1 but the same year-over-year growth — about 6 percent.
It’s tough to tell if last quarter was a sign that Twitter has turned a corner, or an unexpected blip. We’ll find out Thursday.
This article originally appeared on Recode.net.
