Weibo reported modest second-quarter revenue growth but much weaker profitability, as higher costs and expenses drove sharp declines in operating income and net income.
Total net revenue increased 2% year-over-year to $453.8 million from $444.8 million.
Despite the reported top-line growth, advertising and marketing revenue declined 1% to $381 million, while value-added services revenue increased 19% to $72.9 million.
Advertising revenue excluding Alibaba declined 2% to $341.8 million as weaker demand from handset and online gaming advertisers offset growth in internet services and automobile advertising.
Advertising revenue from Alibaba increased 10% to $39.2 million, partly reflecting modestly higher demand associated with promotion of Alibaba’s AI applications as well as favorable foreign-exchange effects.
Costs and expenses increased 12% to $335 million, much faster than the 2% increase in reported revenue.
Operating income consequently declined to $118.9 million from $145.6 million, while operating margin contracted 700 basis points to 26% from 33%.
On a non-GAAP basis, operating income declined to $125.4 million from $161.8 million, and non-GAAP operating margin fell to 28% from 36%.
Net income attributable to Weibo shareholders fell approximately 46% to $67.4 million from $125.7 million.
Diluted EPS was $0.26, while non-GAAP net income attributable to shareholders was $102.7 million, with non-GAAP diluted EPS of $0.38.
Weibo continued to operate at substantial scale, with 561 million monthly active users and 254 million average daily active users in June.
The quarter therefore showed a widening gap between reported revenue growth and profitability as spending on advertising production and marketing increased.
KEY QUOTE:
“On the user front, with our continued efforts to improve user quality and drive user retention through information feed revamp, we saw solid engagement among our core users.”
Gaofei Wang, Chief Executive Officer of Weibo
