Weibo (WB) reports upbeat Q2 results as pandemic situation stabilizes in China

Chinese social media platform Weibo (NASDAQ: WB) reported a year-over-year decline in non-GAAP EPS and revenue for the second quarter of 2020. However, both the bottom line and topline numbers in Q2 surpassed the market’s estimates and sent WB stock in the upward direction today.

Q2 results

Weibo, a subsidiary of SINA Corporation (NASDAQ: SINA), reported adjusted earnings of $0.50 per share in Q2, down 26% from last year. Revenue decreased 10% to $387.4 million due to an 8% decline in advertising and marketing revenues and a 23% decline in value-added service revenues.

With a net addition of 37 million users in the second quarter, monthly active users stood at 523 million at the end of June 2020. Average daily active users rose to 229 million with the company adding 18 million users on a year-over-year basis.

Ad revenues

During the Q2 earnings conference call, CEO Gaofei Wang stated,

“With the COVID-19 pandemic situation in China stabilized and people’s work resumption, we observed the normalization of pandemic-related content consumption, which led to sequential pullback of traffic from the peak level in the first quarter.”

With the stabilization of pandemic in China and the gradual economic recovery, Weibo’s advertising business exhibited recovery trends in the second quarter and improved from prior quarter in terms of annual trends. Key Accounts (KA) ad revenues increased 13% quarter-over-quarter as ad spending by the companies rebounded in the quarter and Weibo saw a prevailing trend of ad budget shifting from offline to online, which got accelerated by the pandemic.

While SME ad revenues decreased 21% annually, they increased by 16% on a sequential basis. Despite the uptick in economic activity, many small and medium-sized advertisers continued to face headwinds to their business operations, especially the offline merchants. Amid the headwinds of pandemic and the competition, Weibo anticipates SME business to take its time to fully recover.

Guidance

Weibo anticipates third quarter 2020 net revenues to decrease by 5% to 7% year-over-year on a constant currency basis. 

Also read: Baidu (BIDU) Q2 earnings rise unexpectedly; stock falls

Assuming no further impact from the pandemic in the coming quarter, Weibo expects the KA business to continue to improve sequentially with the stronger demand fueled by the ecommerce seasonality. The company expects total SME ad spend to increase toward the end of the year.

Entering into the second half, Weibo plans to enhance its distribution efficiency to further drive the video content consumption, which will drive the video ad revenue and incentives to create a self-reinforcing video content ecosystem for the company.

Stock performance

Shares of Weibo ended up 7.44% at $34.96 today. From its yearly low ($28.93) at the end of May, WB stock has gained 21% so far.

Also read: Weibo (WB) Q2 2020 Earnings Call Transcript