•the sufficiency of our cash and cash equivalents, short-term investment balance and credit facility together with cash generated from operations to meet our working capital and capital expenditure requirements;

•our ability to timely and effectively develop, invest in, scale and adapt our existing technology and network infrastructure;

•our ability to successfully acquire and integrate companies and assets; and

•our expectations regarding international ~~operations.~~

operations and foreign exchange gains and losses.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, cash flows or prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

NOTE REGARDING KEY METRICS

We review a number of metrics, including ~~monthly active users, or MAUs, changes in daily active users or~~monetizable daily active usage or ~~DAUs,~~users, or mDAU, changes in ad engagements and changes in cost per ad engagement, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Metrics” for a discussion of how we calculate ~~MAUs, changes in DAUs,~~mDAU, changes in ad engagements and changes in cost per ad engagement.

We define mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com or Twitter applications that are able to show ads. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active total accounts. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three months ended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year. Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our measures of mDAU growth and engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.

The numbers of ~~active users~~mDAU presented in this Quarterly Report on Form 10-Q are based on internal company data. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and ~~user~~ engagement across our large ~~user base~~number of total accounts around the world. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the third quarter of 2020 represented ~~less~~fewer than 5% of our ~~MAUs as~~mDAU during the quarter. The false or spam accounts for a period represents the average of ~~December 31, 2016.~~false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our ~~active users,~~mDAU, and ~~in the past~~ have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam, malicious automation, and fake accounts. ~~Spam accounts that~~We intend to continue to make such improvements. After we ~~have identified are not included~~determine an account is spam, malicious automation, or fake, we stop counting it in ~~the active user numbers presented in this Quarterly Report on Form 10-Q.~~our mDAU, or other related metrics. We also treat multiple accounts held by a single person or organization as multiple ~~users for purposes of calculating our active users~~mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our ~~active users~~mDAU may not accurately reflect the actual number of people or organizations using our platform.

Our metrics are also affected by applications that automatically contact our servers for regular updates with no discernible user-initiated action involved, and this activity can cause our system to count the users associated with such applications as active users on the day or days such contact occurs. As of December 31, 2016, approximately 8.5% of users used third party applications that may have automatically contacted our servers for regular updates without any discernible additional user-initiated action. As such, the calculations of our active users presented in this Quarterly Report on Form 10-Q may be affected as a result of this activity.

In addition, ~~our~~geographic location data ~~regarding user geographic location~~collected for purposes of reporting the geographic location of our ~~MAUs~~mDAU is based on the IP address or phone number associated with the account when ~~a user~~an account is initially registered ~~the account~~ on Twitter. The IP address or phone number may not always accurately reflect a ~~user’s~~person’s actual location at the time ~~such user~~they engaged with our platform. For example, ~~a mobile user may appear to be~~someone accessing Twitter from the location of the proxy server that the ~~user~~person connects to rather than from ~~a user’s~~the person’s actual location.

We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. ~~Our measures of user growth and user engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.~~

~~We present and discuss our total audience based on both internal metrics and relying on data from Google Analytics, which measures logged-out visitors to our properties.~~

P~~ART~~

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TWITTER, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

	September 30,			December 31,
	2017			2016				September 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	1,586,558		$	988,598		Cash and cash equivalents	$	2,201,073	$	1,799,082
Short-term investments		2,671,538			2,785,981		Short-term investments	5,479,974		4,839,970
Accounts receivable, net of allowance for doubtful accounts of $5,362 and $7,216 as of September 30, 2017 and December 31, 2016, respectively		509,854			650,650
Accounts receivable, net of allowance for doubtful accounts of $16,327 and $2,401							Accounts receivable, net of allowance for doubtful accounts of $16,327 and $2,401	747,548		850,184
Prepaid expenses and other current assets		234,472			226,967		Prepaid expenses and other current assets	160,984		130,839
Total current assets		5,002,422			4,652,196		Total current assets	8,589,579		7,620,075
Property and equipment, net		753,317			783,901		Property and equipment, net	1,392,720		1,031,781
Operating lease right-of-use assets							Operating lease right-of-use assets	828,213		697,095
Intangible assets, net		54,560			95,334		Intangible assets, net	58,923		55,106
Goodwill		1,187,880			1,185,315		Goodwill	1,289,147		1,256,699
Deferred tax assets, net							Deferred tax assets, net	792,362		1,908,086
Other assets		77,610			153,619		Other assets	137,848		134,547
Total assets	$	7,075,789		$	6,870,365		Total assets	$	13,088,792	$	12,703,389
Liabilities and stockholders' equity							Liabilities and stockholders' equity
Current liabilities:							Current liabilities:
Accounts payable	$	103,112		$	122,236		Accounts payable	$	241,102	$	161,148
Accrued and other current liabilities		296,152			380,937		Accrued and other current liabilities	623,885		500,893
Capital leases, short-term		81,938			80,848
Convertible notes, short-term							Convertible notes, short-term	905,532		0
Operating lease liabilities, short-term							Operating lease liabilities, short-term	161,508		146,959
Finance lease liabilities, short-term							Finance lease liabilities, short-term	3,076		23,476
Total current liabilities		481,202			584,021		Total current liabilities	1,935,103		832,476
Convertible notes		1,604,932			1,538,967
Capital leases, long-term		85,622			66,837
Convertible notes, long-term							Convertible notes, long-term	1,858,685		1,816,833
Senior notes, long-term							Senior notes, long-term	692,742		691,967
Operating lease liabilities, long-term							Operating lease liabilities, long-term	727,011		609,245

Deferred and other long-term tax liabilities, net		11,858			7,556		Deferred and other long-term tax liabilities, net	28,845		24,170
Other long-term liabilities		62,769			68,049		Other long-term liabilities	34,318		24,312
Total liabilities		2,246,383			2,265,430		Total liabilities	5,276,704		3,999,003
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 14)							Commitments and contingencies (Note 14)
Stockholders' equity:							Stockholders' equity:
Preferred stock, $0.000005 par value-- 200,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.000005 par value-- 5,000,000 shares authorized; 741,907 and 721,572 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		4			4
Preferred stock, $0.000005 par value-- 200,000 shares authorized; NaN issued and outstanding							Preferred stock, $0.000005 par value-- 200,000 shares authorized; NaN issued and outstanding	0		0
Common stock, $0.000005 par value-- 5,000,000 shares authorized; 794,447 and 779,619 shares issued and outstanding							Common stock, $0.000005 par value-- 5,000,000 shares authorized; 794,447 and 779,619 shares issued and outstanding	4		4
Additional paid-in capital		7,628,966			7,224,534		Additional paid-in capital	9,249,956		8,763,330
Accumulated other comprehensive loss		(36,756	)		(69,253	)	Accumulated other comprehensive loss	(90,087)		(70,534)
Accumulated deficit		(2,762,808	)		(2,550,350	)
Retained earnings (accumulated deficit)							Retained earnings (accumulated deficit)	(1,347,785)		11,586
Total stockholders' equity		4,829,406			4,604,935		Total stockholders' equity	7,812,088		8,704,386
Total liabilities and stockholders' equity	$	7,075,789		$	6,870,365		Total liabilities and stockholders' equity	$	13,088,792	$	12,703,389

Nine Months Ended September 30,

2017

2016

Cash flows from operating activities

Net loss

$
(199,142
)

$
(289,819
)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization expense

303,347

282,782

Stock-based compensation expense

331,352

477,138

Amortization of discount on convertible notes

59,644

55,590

Changes in bad debt provision

26

2,253

Deferred income taxes

(1,343
)

58

Impairment of investments in privately-held companies

62,439

2,000

Other adjustments

(1,278
)

7,374

Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions:

Accounts receivable

155,598

51,191

Prepaid expenses and other assets

4,353

2,331

Accounts payable

(14,458
)

(26,291
)
Accrued and other liabilities

(67,436
)

1,905

Net cash provided by operating activities

633,102

566,512

Cash flows from investing activities

Purchases of property and equipment

(117,800
)

(170,552
)
Purchases of marketable securities

(2,020,115
)

(2,277,727
)
Proceeds from maturities of marketable securities

2,023,778

2,033,257

Proceeds from sales of marketable securities

108,818

174,017

Proceeds from sales of long-lived assets

35,000

—

Changes in restricted cash

3,209

(6,606
)
Purchases of investments in privately-held companies

(825
)

(81,502
)
Business combinations, net of cash acquired

—

(80,142
)
Other investing activities

(10,102
)

(1,181
)
Net cash provided by (used in) investing activities

21,963

(410,436
)
Cash flows from financing activities

Taxes paid related to net share settlement of equity awards

(7,049
)

(11,098
)
Payments of capital lease obligations

(80,685
)

(73,897
)
Proceeds from exercise of stock options

7,872

7,070

Proceeds from issuances of common stock under employee stock purchase plan

14,019

15,821

Other financing activities

—

570

Net cash used in financing activities

(65,843
)

(61,534
)
Net increase in cash and cash equivalents

589,222

94,542

Foreign exchange effect on cash and cash equivalents

8,738

5,944

Cash and cash equivalents at beginning of period

988,598

911,471

Cash and cash equivalents at end of period

$
1,586,558

$
1,011,957

Supplemental disclosures of non-cash investing and financing activities

Common stock issued in connection with acquisitions

$
—

$
644

Equipment purchases under capital leases

$
100,633

$
63,022

Changes in accrued property and equipment purchases

$
(23,521
)

$
7,779


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Common stock
Balance, beginning of period	790,426	$	4	772,393	$	4	779,619	$	4	764,257	$	4
Issuance of common stock in connection with RSU vesting	4,085	—		3,264	—		12,256	—		10,396	—
Issuance of restricted stock in connection with acquisitions	—	—		—	—		33	—		—	—
Issuance of restricted stock in connection with acquisitions accounted for as stock-based compensation	0	—		0	—		1,381	—		306	—
Exercise of stock options	37	—		152	—		301	—		347	—
Issuance of common stock upon purchases under employee stock purchase plan	0	—		0	—		1,395	—		901	—
Shares withheld related to net share settlement of equity awards	(101)	—		(91)	—		(538)	—		(487)	—
Other activities	—	—		0	—		—	—		(2)	—
Balance, end of period	794,447	$	4	775,718	$	4	794,447	$	4	775,718	$	4
Additional paid-in capital
Balance, beginning of period	—	$	9,127,495	—	$	8,535,463	—	$	8,763,330	—	$	8,324,974


Issuance of restricted stock in connection with acquisitions	—	—		—	—		—	1,312		—	—
Exercise of stock options	—	31		—	245		—	454		—	754
Issuance of common stock upon purchases under employee stock purchase plan	—	0		—	0		—	34,395		—	25,209
Shares withheld related to net share settlement of equity awards	—	(3,726)		—	(3,757)		—	(18,344)		—	(16,695)
Stock-based compensation	—	126,156		—	106,783		—	376,600		—	304,492
Equity component of the convertible note issuance, net	—	—		—	—		—	92,209		—	—




Balance, end of period	—	$	9,249,956	—	$	8,638,734	—	$	9,249,956	—	$	8,638,734
Accumulated other comprehensive loss
Balance, beginning of period	—	$	(93,000)	—	$	(46,944)	—	$	(70,534)	—	$	(65,311)
Other comprehensive income (loss)	—	2,913		—	(68,965)		—	(19,553)		—	(50,598)
Balance, end of period	—	$	(90,087)	—	$	(115,909)	—	$	(90,087)	—	$	(115,909)
Retained earnings (Accumulated deficit)
Balance, beginning of period	—	$	(1,376,444)	—	$	(143,709)	—	$	11,586	—	$	(1,454,073)

Cumulative-effect adjustment from adoption of current expected credit loss guidance	—	—		—	—		—	(1,629)		—	—
Net income (loss)	—	28,659		—	36,522		—	(1,357,742)		—	1,346,886
Balance, end of period	—	$	(1,347,785)	—	$	(107,187)	—	$	(1,347,785)	—	$	(107,187)
Total stockholders' equity	794,447	$	7,812,088	775,718	$	8,415,642	794,447	$	7,812,088	775,718	$	8,415,642

Investments are reviewed periodically to identify possible other-than-temporary impairments. No impairment loss has been recorded on the securities included in the tables above as the Company believes that the decrease in fair value of these securities is temporary and expects to recover the initial cost of investment for these securities.

The Company has a partnership agreement for no consideration with Square, Inc., for which Jack Dorsey (the Company’s Chief Executive Officer) serves as Chief Executive Officer, to enable U.S. political donations through Tweets. Neither Square, Inc. nor the Company will pay each other any amounts in connection with the agreement. The agreement has no impact on the Company’s financial statements.

Certain of the Company’s directors have affiliations with customers of the Company. The Company recognized revenue under contractual obligations from such customers of $6.2 million and $16.2 million for the three and nine months ended September 30, 2017, respectively. The Company had outstanding receivable balances of $4.2 million from such customers as of September 30, 2017.

On October 25, 2016, the Board of Directors of the Company approved a reduction in force plan (“2016 Plan”) of up to approximately 9% of the Company’s positions globally. The reduction in force was undertaken to eliminate investment in noncore areas and drive toward greater efficiency, while allowing the Company to continue to invest in its highest priorities.

~~On December 17, 2016, the Board of Directors of the Company approved a lease abandonment plan (“2016 Lease Plan”) to abandon excess office space with lease terms expiring through 2028.~~

~~The following table summarizes the activities related to restructuring charges, as discussed above (in thousands):~~

2016 Employee

2016

Termination Plan

Lease Plan

Charges

$
21,611

$
79,685

Cash payment

(11,629
)

(3,562
)
Non-cash and other adjustments

(6,357
)

(19,577
)
Accrued as of December 31, 2016

$
3,625

$
56,546

Charges ⁽¹⁾

$
772

$
2,824

Cash payment

(4,225
)

(20,369
)
Non-cash and other adjustments

76

(3
)
Accrued as of September 30, 2017

$
248

$
38,998

Reflected in consolidated balance sheets as of September 30, 2017:

Accrued and other current liabilities

$
248

$
35,697

Other long-term liabilities

$
—

$
3,301

⁽¹⁾

~~For the three months ended September 30, 2017, the Company~~ ~~recorded restructuring charges related to its 2016 Lease Plan of $0.5 million within sales and marketing, $0.4 million withinresearch and development, $0.3 million within general and administrative and $0.1 million within cost of revenue in the consolidated statements of operations.~~ ~~For the nine months ended September 30, 2017, the Company~~ ~~recorded restructuring charges related to its 2016 Lease Plan of $1.8 million within sales and marketing, $1.0 million withinresearch and development, $0.6 million within general and administrative and $0.2 million within cost of revenue in the consolidated statements of operations.~~

I~~tem~~

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Overview and Highlights of Quarterly Results

Revenue in the third quarter of ~~2017~~2020 totaled ~~$589.6~~$936.2 million, ~~a decrease~~an increase of 4%14%, compared to ~~$615.9 million in~~ the third quarter of ~~2016.~~

2019.

•Advertising revenue totaled $~~502.8~~$808.4 million, ~~a decrease~~an increase of ~~8% year-over-year.~~

15% year over year.

•Data licensing and other revenue totaled $~~86.8~~$127.8 million, an increase of ~~22% year-over-year.~~

5% year over year.

•U.S. revenue totaled $~~332.1 million, a decrease of 11% year-over-year.~~

•~~International revenue totaled $257.5~~$512.6 million, an increase of ~~6% year-over-year.~~

10% year over year.

•~~Total ad engagements~~ ~~increased 99% year-over-year.~~

~~•Cost per ad engagement decreased 54% year-over-year.~~

~~Net loss was $21.1 million, a decrease of 79% year-over-year.~~

~~Non-GAAP net income was $77.8~~International revenue totaled $423.6 million, an increase of ~~27% year-over-year.~~

~~Adjusted EBITDA~~18% year over year.

Net income was ~~$207.0~~$28.7 million ~~an increase~~for the three months ended September 30, 2020 compared to $36.5 million for the three months ended September 30, 2019.

Income from operations was $56.1 million, or 6% of ~~14% year-over-year.~~

total revenue, for the three months ended September 30, 2020, compared to $44.1 million, or 5% of total revenue, for the three months ended September 30, 2019.

Cash, cash equivalents and short-term investments in marketable securities totaled ~~$4.26~~$7.68 billion as of September 30, ~~2017.~~

2020.

Average ~~monthly~~monetizable daily active ~~users were 330 million~~usage (mDAU) for the three months ended September 30, ~~2017,~~2020 was 187 million, an increase of 4%29% year over year.

COVID-19 Update

The COVID-19 pandemic has resulted in public health responses including travel bans, restrictions, social distancing requirements, and shelter-in-place orders, which have negatively impacted our business, operations, and financial performance. Despite these challenges, in the third quarter of 2020, our year-over-year growth in mDAU remained strong, primarily driven by external factors, including increased global conversation around the COVID-19 pandemic, the run-up to U.S. elections, and ~~compared~~other current events. Our work to ~~326 million~~⁽¹⁾~~for~~serve the ~~three months ended June 30, 2017.~~

~~Average daily active usage for~~public conversation, to help people find trusted sources of information, and to better organize and surface the ~~three months ended~~many topics and interests that bring people to Twitter, helped us retain new and recently reactivated accounts in the third quarter of 2020. We also continue to benefit from the ongoing impact of product improvements, including continued increases in relevance across notifications, search, Explore, and the Home timeline.

In the third quarter of 2020, advertisers around the world significantly increased their investment on Twitter, seeking to engage our larger audience around the return of events as well as increased and previously delayed product launches. We experienced improved advertising demand from the second quarter of 2020, when the decrease in advertising spend led to our conclusion that the deferred tax assets in a foreign subsidiary are not more-likely-than-not to be realized and recorded a valuation allowance of $1.10 billion. This valuation allowance would be reversed in the event, and to the extent, that it is more-likely-than-not that there will be sufficient taxable income in the foreign subsidiary to realize the tax benefit. Depending on the extent and severity of COVID-19’s impact, we could have additional deferred tax asset valuation allowances in future periods. As of September 30, ~~2017 grew 14% year-over-year.~~

⁽¹⁾~~Reported average Monthly Active Users reflects adjustments for approximately 1-2 million users per~~2020, there have been no changes to our conclusion.

In light of the current operating and economic environment, we have shifted resources and priorities to increase focus on our revenue products. Expense growth in the third quarter of ~~certain third-party applications~~2020 was slightly higher than our expectations as COVID-related operational constraints, that ~~were included as Twitter MAUs that should not have been considered MAUs in certain prior periods. Daily Active Usage was not affected. Further details regarding the adjustment can be found~~previously limited our ability to invest, abated in the ~~section titled "Note About~~third quarter of 2020 and we incurred more revenue-related expenses due to the outperformance of advertising revenue. Given improving business conditions, we intend to continue investing in our most important work and expect total costs and expenses to grow closer to 20% year over year in the fourth quarter of 2020. We have responded quickly and decisively to the challenges presented by the current environment, updating our policies, increasing our use of machine learning and automation to take actions on potentially abusive and manipulative content, ensuring the continuity of our service, and partnering with advertisers to adapt their campaigns to the current situation.

Given the continued and unprecedented uncertainty and rapidly shifting market conditions of the business environment, we cannot reasonably estimate the full impacts of the COVID-19 pandemic on our future financial and operational results. Our ~~MAU Adjustment."~~

past results may not be indicative of our future performance, and historical trends in revenue, income (loss) from operations, net income (loss), and net income (loss) per share may differ materially. For example, to the extent the pandemic continues to disrupt economic activity globally, it could continue to adversely affect our business, operations and financial results through prolonged decreases in advertising spend, credit deterioration of our customers, depressed economic activity, or declines in capital markets. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and there may be developments outside our control requiring us to adjust our operating plan. As such, given the unprecedented uncertainty around the duration and severity of the impact on market conditions and the business environment, we cannot reasonably estimate the full impacts of the COVID-19 pandemic on our operating results in the future.

The risks related to the COVID-19 pandemic on our business are further described in “Part II—Other Information, Item 1A. Risk Factors.”

Key Metrics

We review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

~~Monthly~~

Monetizable Daily Active Usage or Users ~~(MAUs)~~(mDAU). We define ~~MAUs~~mDAU as ~~Twitter users~~people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com or Twitter applications that are able to show ads. We believe that mDAU, and its related growth, is the best way to measure our website, mobile website, desktop or mobile applications, SMS or registered third-party applications or websites in the 30-day period ending on the date of measurement. Average MAUs for a period represent the average of the MAUs at the end of each month during the period. MAUs are a measure ofsuccess against our objectives and to show the size of our logged in or otherwise authenticated active user base. In the three months ended September 30, 2017, we had 330 million average MAUs, which represents an increase of 4% from the three months ended September 30, 2016⁽¹⁾~~. The growth in average MAUs was driven by a combination of organic growth, marketing,~~audience and product, including the ongoing benefits of improved relevance in email, push notifications and the timeline. In the three months ended September 30, 2017, we had 69 million average MAUs in the United States and 261 million average MAUs in the rest of the world, which represent increases of 4% and 4%, respectively, from the three months ended September 30, 2016. For additional information on how we calculate MAUs and factors that can affect this metric, see the section titled “Note Regarding Key Metrics.”

MAU growth is typically seasonally weak in the fourth quarter. In addition, a recent change to the Safari interface may affect some third-party apps including Twitter. For Twitter, any impact would affect MAUs that access Twitter by using registered third party applications when those applications automatically contact our servers for regular updates without discernible user-initiated action, which we refer to as third-party auto-polling MAU. However, we do not serve ads to this subset of MAUs and as a result, no revenue is generated from such MAUs.

⁽¹⁾Reported average Monthly Active Users reflects adjustments for approximately 1-2 million users per quarter of certain third-party applications that were included as Twitter MAUs that should not have been considered MAUs in certain prior periods. Daily Active Usage was not affected. Further details regarding the adjustment can be found in the section titled "Note About Our MAU Adjustment."

~~Note About Our MAU Adjustment~~

We discovered that since the fourth quarter of 2014 we had included users of certain third-party applications as Twitter MAUs that should not have been considered MAUs. These third-party applications used Digits, a software development kit of our now-divested Fabric platform, that allowed third-party applications to send authentication messages via SMS through our systems, which did not relate to activity on the Twitter platform. The table below presents the impact for the periods beginning in the fourth quarter of 2016. Due to our data retention policies, we do not have data to reconcile periods prior to the fourth quarter of 2016, but our estimates suggest the prior period adjustments are smaller than those in the fourth quarter of 2016.

Three Months Ended December 31, 2016

Three Months Ended March 31, 2017

Three Months Ended June 30, 2017

United States

International

Worldwide

United States

International

Worldwide

United States

International

Worldwide

(in millions)

Previously Reported MAU

67

252

319

70

259

328

68

260

328

Adjustment ⁽¹⁾

—

(1
)

(1
)

(1
)

(1
)

(2
)

—

(2
)

(2
)
Adjusted MAU

67

251

318

69

257

327

68

258

326

⁽¹⁾ The difference between Adjusted MAU and Previously Reported MAU does not correspond to the amount of the Adjustment due to rounding.

~~Changes in Daily Active Users/Daily Active Usage (DAU)~~. We define daily active users or daily active usage as Twitter users who logged in or were otherwise authenticated and accessed Twitter through our website, mobile website or mobile applications on any given day.engagement. Average ~~DAU~~mDAU for a period represents the number of ~~DAUs~~mDAU on each day of such period divided by the number of days for such period. Changes in ~~DAU~~mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active ~~user base.~~total accounts. To calculate the year-over-year change in ~~DAUs,~~mDAU, we subtract the average ~~DAU~~mDAU for the three months ended in the previous year from the average ~~DAU~~mDAU for the same three months ended in the current year and divide the result by the average ~~DAU~~mDAU for the three months ended in the previous year. ~~Prior~~Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to ~~reporting results for~~similarly titled measures presented by other companies.

In the ~~third quarter of 2016,~~three months ended September 30, 2020, we had ~~discussed DAUs~~187 million average mDAU, which represents an increase of 29% from the three months ended September 30, 2019. The increase was driven by global conversation around current events and ongoing product improvements. In the ~~ratio~~three months ended September 30, 2020, we had 36 million average mDAU in the United States and 152 million average mDAU in the rest of ~~MAUs to DAUs. In those instances, for comparability~~the world, which represent increases of 20% and ~~consistency with MAUs, DAUs also included users who accessed Twitter through our desktop applications and third-party properties.~~ 32%, respectively, from the three months ended September 30, 2019.

For additional information on how we calculate changes in ~~DAUs~~mDAU and factors that can affect this metric, see the section titled “Note Regarding Key Metrics.” ~~Reported DAU metrics were not impacted by the MAU adjustment discussed above as DAU do not include users from third-party applications.~~

~~DAU grew faster than MAU in the third quarter of 2017 as we continued to benefit from organic growth, product and marketing investments made in this quarter and in prior periods.~~

Changes in Ad Engagements and Changes in Cost per Ad Engagement. We define an ad engagement as ~~a user~~an interaction with one of our pay-for-performance advertising products. Ad engagements with our advertising products are based on ~~a user completing~~the completion of an objective set out by an advertiser such as expanding, Retweeting, liking or replying to a Promoted Tweet, viewing an embedded video, downloading or engaging with a promoted mobile application, clicking on a website link, signing up for marketing emails from advertisers, following the account that ~~tweets~~Tweets a Promoted Tweet, or completing a transaction on an external website. We believe changes in ad engagements is one way to measure ~~user~~ engagement with our advertising products. ~~We believe changes in cost~~Cost per ad engagement is an output of our ads auction process, and will vary from one ~~way~~period to ~~measure demand.~~

another based on geographic performance, auction dynamics, the strength of demand for various ad formats, and campaign objectives.

In the three months ended September 30, ~~2017,~~2020, ad engagements increased ~~99%~~27% from the three months ended September 30, ~~2016. The increase was~~2019, driven by ~~a continuing mix shift toward video~~strong growth in ad impressions ~~as well as higher click-through rates across all ad formats on a like-for-like basis.~~due to our growing audience and increased demand for ads. In the three months ended September 30, ~~2017, average~~2020, cost per ad engagement decreased ~~54% from~~by 9% compared to the three months ended September 30, ~~2016. The decrease in cost per~~2019, driven by price decreases across most ad ~~engagement reflects a higher mix of video ad engagements and lower cost per ad engagement across the majority of ad formats compared to the third quarter of 2016.~~

~~Non-GAAP Financial Measures~~

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles in the United States, or GAAP, we consider certain financial measures that are not prepared in accordance with GAAP, including Adjusted EBITDA, non-GAAP income before income taxes, non-GAAP provision for income taxes as it relates to the calculation of non-GAAP net income, and non-GAAP net income. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

~~Adjusted EBITDA~~

We define Adjusted EBITDA as net loss adjusted to exclude stock-based compensation expense, depreciation and amortization expense, interest and other expenses, provision (benefit) for income taxes, restructuring charges and one-time nonrecurring gain, if any.

~~The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):~~

formats.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Reconciliation of Net Loss to Adjusted EBITDA

Net loss

$
(21,095
)

$
(102,871
)

$
(199,142
)

$
(289,819
)
Stock-based compensation expense

100,959

158,527

331,352

477,138

Depreciation and amortization expense

97,492

100,878

303,347

282,782

Interest and other expense, net

24,810

18,220

117,613

55,007

Provision for income taxes

3,564

6,562

10,171

11,231

Restructuring charges and one-time nonrecurring gain

1,269

—

(8,529
)

47

Adjusted EBITDA

$
206,999

$
181,316

$
554,812

$
536,386

~~Non-GAAP Net Income~~

We define non-GAAP net income as net loss adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, non-cash interest expense related to convertible notes, non-cash expense related to acquisitions, impairment of investments in privately-held companies, restructuring charges and one-time nonrecurring gain, and adjustment to income tax expense based on the non-GAAP measure of profitability using our blended U.S. statutory tax rate (which was 37%).

~~Non-GAAP Income before Income Taxes~~. We define non-GAAP income before income taxes as loss before income taxes adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, non-cash interest expense related to convertible notes, non-cash expense related to acquisitions, impairment of investments in privately-held companies, and restructuring charges and one-time nonrecurring gain.

~~Non-GAAP Provision for Income Taxes~~. We define non-GAAP provision for income taxes as the current and deferred income tax expense commensurate with the non-GAAP measure of profitability using our blended U.S. statutory tax rate (which was 37%).

~~The following table presents a reconciliation of net loss to non-GAAP net income for each of the periods indicated (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Reconciliation of Net Loss to Non-GAAP Net Income

Net loss

$
(21,095
)

$
(102,871
)

$
(199,142
)

$
(289,819
)
Exclude: Provision for income taxes

3,564

6,562

10,171

11,231

Loss before income taxes

(17,531
)

(96,309
)

(188,971
)

(278,588
)
Stock-based compensation expense

100,959

158,527

331,352

477,138

Amortization of acquired intangible assets

11,077

16,572

41,608

42,118

Non-cash interest expense related to convertible notes

20,355

18,650

59,644

55,590

Impairment of investments in privately-held companies

7,439

—

62,439

—

Restructuring charges and one-time nonrecurring gain

1,269

—

(8,529
)

47

Non-GAAP income before income taxes

123,568

97,440

297,543

296,305

Non-GAAP provision for income taxes

45,720

36,053

110,091

109,633

Non-GAAP net income

$
77,848

$
61,387

$
187,452

$
186,672

We use non-GAAP financial measures of Adjusted EBITDA, non-GAAP income before income taxes, non-GAAP provision for income taxes, and non-GAAP net income in evaluating our operating results and for financial and operational decision-making purposes. We believe that Adjusted EBITDA, non-GAAP income before income taxes and non-GAAP net income help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA, non-GAAP income before income taxes and non-GAAP net income. We believe that Adjusted EBITDA, non-GAAP income before income taxes and non-GAAP net income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to key metrics used by our management in its financial and operational decision-making. We also use these measures to establish budgets and operational goals for managing our business and evaluating our performance.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than net loss, which is the nearest GAAP equivalent of these financial measures. Some of these limitations are:

These non-GAAP financial measures exclude restructuring charges, one-time nonrecurring gain and certain recurring, non-cash charges such as stock-based compensation expense, amortization of acquired intangible assets, non-cash interest expense related to convertible notes and impairment of investments in privately-held companies;

~~Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;~~

~~Adjusted EBITDA and non-GAAP income before income taxes do not reflect tax payments that reduce cash available to us;~~

~~Non-GAAP net income reflects an estimate of taxes calculated in accordance with the SEC’s Non-GAAP Financial Measures Compliance and Disclosure Interpretation, not actual taxes due or payable;~~

Adjusted EBITDA excludes depreciation and amortization expense and although these are non-cash charges, the property and equipment being depreciated and amortized may have to be replaced in the future; and

The expenses that we exclude in our calculation of these non-GAAP financial measures may differ from the expenses, if any, that our peer companies may exclude from similarly-titled non-GAAP measures when they report their results of operations.

Results of Operations

•technical or other problems prevent us from delivering our products or services in a rapid and reliable manner or otherwise affect ~~the user experience, including issues with connecting to the Internet;~~

people’s experiences on Twitter;

~~users~~•people have difficulty installing, updating, or otherwise accessing our products or services on mobile devices as a result of actions by us or third parties that we rely on to distribute our products and deliver our services;

~~we are unable to manage and prioritize information to ensure users are presented with content that is interesting, useful and relevant to them;~~

~~users believe that their experience is diminished as a result of the decisions we make with respect to the frequency, format, relevance and prominence of ads that we display;~~

~~there are adverse~~ •changes in our products or services that are mandated by, or that we elect to make to address, laws (such as the General Data Protection Regulation (GDPR)) or legislation, inquiries from legislative bodies, regulatory authorities or litigation ~~including~~(including settlements or consent ~~decrees;~~

decrees) adversely affect our products or services;

•we fail to provide adequate customer ~~service to users;~~service; or

•we do not maintain our brand image or ~~our reputation is damaged.~~

reputation.

~~We believe that returning to meaningful MAU growth is dependent on improving our product and feature offerings to demonstrate our value proposition to a larger audience.~~

If we are unable to increase our ~~user base, user growth rate~~mDAU or ~~user~~ engagement, or if these metrics decline, our products and services could be less attractive to ~~potential or new users,~~people on Twitter, as well as to advertisers, content partners and platform partners, which would have a material and adverse impact on our business, financial condition and operating results.

If our users or content partners do not continue to contribute content or such content is not viewed as unique or engaging by other users, we may experience a decline in the number of users accessing our products and services and user engagement, which could result in the loss of content partners, advertisers, platform partners and revenue.

Our success depends on our ability to provide users of our products and services with unique and engaging content, which in turn depends on the content contributed by our users. We believe that one of our competitive advantages is the quality, quantity and real-time nature of the content on Twitter, and that access to unique or real-time content is one of the main reasons users visit Twitter. We seek to foster a broad and engaged user community, and we encourage world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands to use our products and services to express their views to broad audiences. We also encourage media outlets to use our products and services to distribute their content. In addition, we license our premium live streaming video content from a variety of content providers. If these content providers are no longer willing or able to license us content upon economic and other terms that are acceptable to us, our ability to stream such content will be adversely affected and/or our costs could increase. If users, including influential users, do not continue to contribute content or content providers do not license content to Twitter, and we are unable to provide users with unique, engaging and timely content, our user base and user engagement may decline. Additionally, if we are not able to address user concerns regarding the safety and security of our products and services or if we are unable to successfully prevent abusive or other hostile behavior on our platform, the size of our user base and user engagement may decline. We rely on the sale of advertising services for the substantial majority of our revenue and a decline in the number of users, user growth rate, or user engagement, including as a result of the loss of world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands who generate content on Twitter, advertisers may deter new advertisers from using our products or services or cause current advertisers to reduce their spending with us or cease doing business with us, which would harm our business and operating results.

We generate the substantial majority of our revenue from advertising. The loss of advertising revenue could harm our business.

The substantial majority of our revenue is currently generated from third parties advertising on Twitter. We ~~generated approximately 89% and 86% of our revenue from advertising in the fiscal year ended December 31, 2016 and the nine months ended September 30, 2017, respectively. We~~ generate substantially all of our advertising revenue through the sale of our ~~three~~ Promoted Products: Promoted Tweets, Promoted Accounts and Promoted Trends. As is common in our industry, our advertisers do not have long-term advertising commitments with us. As a result of the COVID-19 pandemic, we experienced a reduction in advertiser demand in the month of March and the second quarter of 2020 compared to the same period in 2019. In the third quarter of 2020, revenue increased compared to the same period in 2019 as advertisers increased their investment on Twitter, engaging our larger audience around the return of events as well as increased and previously delayed product launches. However, we may experience reduced advertiser demand and decreased advertising revenue in future quarters due to the ongoing and potential future impacts of the COVID-19 pandemic.

In addition, many of our advertisers purchase our advertising services through one of several large advertising ~~agency~~agencies' holding companies. To sustain or increase our revenue, we must add new advertisers and encourage existing advertisers to maintain or increase the amount of advertising inventory purchased through our platform and adopt new features and functionalities that we add to our platform. However, advertising agencies and potential new advertisers may view our Promoted Products or any new products or services we offer as experimental and unproven, and we may need to devote additional time and resources to educate them about our products and services. Further, our advertisers’ ability to effectively target their advertising to our audience’s interests may be impacted by the degree to which people on Twitter agree in our settings to certain types of personalization or ad targeting, which could have an impact on our revenue. People that already have accounts may change their choices as a result of changes to our privacy control settings that we have implemented or may implement in the future, and people new to Twitter may choose varied levels of personalization, whether in connection with future changes we make to product privacy settings, regulations, regulatory actions, the customer experience, or otherwise. Changes to operating systems’ practices and policies, such as Apple’s iOS updates that may impose heightened restrictions related to Apple device identifiers, may also reduce the quantity and quality of the data and metrics that can be collected or used by us and our partners. These limitations may adversely affect Twitter's and our advertisers' ability to effectively target advertisements and measure their performance, which could reduce the demand and pricing for our advertising products and harm our business. Over time, personalization rates will impact our ability to grow our performance advertising business. Advertisers also may choose to ~~reach users through~~use our free products and services instead of our Promoted Products. Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return on investment relative to alternatives, including online, mobile and traditional advertising platforms. In addition, competition for advertising is becoming increasingly more intense and our advertising revenue could be further impacted by escalating competition for digital ad ~~spending as well as the re-evaluation of our revenue product feature portfolio, which could result in the de-emphasis of certain product features. Since our initial public offering, our~~spending.

Our advertising revenue growth ~~has been~~is primarily driven by increases in ~~the~~mDAU, increases in ad pricing or number of ~~our users~~ads shown and increases in our clickthrough rate. Although we experienced increased mDAU and ad ~~load driven by strong~~engagement growth since the start of the COVID-19 pandemic, we experienced a decline in revenue in the month of March and the second quarter of 2020 compared to the same period in 2019 due to a reduction in advertiser demand on our platform. In the third quarter of 2020, revenue increased compared to the same period in 2019 as ~~well as other factors.~~advertisers increased their investment on Twitter. To date, however, our available advertising inventory has been greater than demand. Our future revenue growth, however, may be limited by available advertising inventory for specific ad types on certain days if we do not increase ~~the number of~~ our ~~users, their engagement~~mDAU or monetize our larger global audience. Our advertising revenue also could be ~~adversely~~ affected by a number of other factors, ~~including:~~

~~decreases in user engagement with the ads~~including advertiser reaction to content published on our platform or our policies and ~~those~~responses thereto, bugs or other product issues that ~~we serve off of~~may impact our ~~platform;~~

~~decreases in the size of our user base or user growth rate;~~

if we are unable to demonstrate the value of our Promoted Products to advertisers and advertising agencies or if we are unable to measure the value of our Promoted Products in a manner which advertisers and advertising agencies find useful;

~~if we are unable to demonstrate the value of, or attract video and video advertisements on, our platform;~~

~~decreases in the perceived quantity, quality, usefulness or relevance of the content generated by our users or content partners;~~

if our Promoted Products are not cost effective or not valued by certain types of advertisers or if we are unable to develop cost effective or valuable advertising services for different types of advertisers;

~~if we are unable to convince advertisers and brands to invest resources in learning to use our products and services and maintaining a brand presence on Twitter;~~

~~our advertisers’~~ ability to ~~optimize their campaigns or~~ effectively ~~and reliably measure the results of their campaigns;~~

product or service changes we may make that change the frequency or relative prominence of ads displayed on Twitter or that detrimentally impact revenue in the near term with the goal of achieving long term benefits;

~~our inability to increase advertiser demand and spend from new and existing advertisers as well as advertising inventory;~~

~~our inability to increase the relevance of ads shown to users;~~

~~our inability to~~ help advertisers ~~effectively~~ target ads ~~including as a result of the fact that we do not collect extensive personal information from~~or share data with our ~~users~~measurement and ~~that we do not have real-time geographic information for all of our users particularly for ads served through our app mobile-focused advertising exchange;~~

~~decreases in the cost per~~ ad ~~engagement;~~

~~failure to effectively monetize our growing international user base, our logged-out audience or our syndicated audience;~~

~~loss of advertising market share to our competitors;~~

~~the degree to which users access Twitter content through applications that do not contain our ads;~~

~~any arrangements or other partnerships with third parties to share our revenue;~~

~~if our new advertising strategies do not gain traction;~~

~~the impact of new technologies that could block or obscure the display of our ads;~~

adverse legal developments relating to advertising or measurement tools related to our metrics or the effectiveness of advertising, including legislative and regulatory developments, and developments in litigation;

~~our inability to create new products, product features and services that sustain or increase the value of our advertising services to both our advertisers and our users;~~

~~changes to our products or development of new products or product features that decrease users’ ad engagements or limit the types of user interactions that we count as ad engagements;~~

~~the impact of fraudulent clicks or spam on our Promoted Products and our users;~~

~~changes in the way our advertising is priced; and~~

~~the impact of macroeconomic conditions and conditions in the advertising industry in general.~~

partners. The occurrence of any of these ~~or other~~ factors could result in a reduction in demand for our ads, which may reduce the prices we receive for our ads, either of which would ~~negatively affect~~adversely impact our revenue, business, financial condition and operating results.

We cannot be certain of the extent of the global slowdown of economic activity, including the decrease in demand for a broad variety of goods and services (including advertiser demand for our platform), or the pace of recovery when the COVID-19 pandemic subsides.

If we are unable to compete effectively, ~~for users and advertiser spend,~~ our business and operating results could be harmed.

~~Competition~~

We face intense competition for ~~users of~~people to use our ~~products~~platform, content and ~~services is intense. Although we have developed a global platform that we believe is the best~~data partners and ~~fastest place to see what’s happening and what people are talking about all around the world, we face strong competition in our business.~~advertising spend. We compete for our audience against ~~many~~a variety of social networking platforms, messaging companies ~~to attract~~ and ~~engage users, including~~media companies, some of which have greater financial resources, ~~and substantially~~ larger ~~user bases,~~audiences or more established relationships with advertisers, such as Facebook (including Instagram and WhatsApp), Alphabet (including Google and YouTube), Microsoft (including LinkedIn), Snap, TikTok, and ~~Oath (formerly known as Yahoo), which offer a variety of Internet~~Verizon Media Group, or in certain regions WeChat, Kakao and mobile device-based products, services and content. For example, Facebook operates a social networking site with significantly more users than Twitter and has been introducing features similar to those of Twitter. In addition, Alphabet may use its strong position in oneLine. New or ~~more markets to gain a competitive advantage over us in areas in which we operate, including by integrating competing features into products or services they control. As a result, our~~existing competitors may draw ~~users~~people towards their products or services and away from ~~ours. This~~ours by introducing new product features, including features similar to those we offer, investing their greater resources in audience acquisition efforts, or otherwise developing products or services that audiences choose to engage with rather than Twitter, any of which could decrease ~~the~~mDAU growth or engagement ~~of our user base, which, in turn, would~~and negatively affect our business.

We also compete ~~against largely regional social media~~with respect to content generated by our content partners and ~~messaging companies~~the availability of applications developed by platform partners. We may not establish and maintain relationships with content partners who publish on our platform or platform partners who develop applications that ~~have strong positions in particular countries such as Kakao~~integrate with our platform. Our content and ~~Line.~~

platform partners may choose to publish content on, or develop applications for, other platforms, and if they cease to utilize our platform or decrease their use of our platform, then mDAU, engagement, and advertising revenue may decline.

We believe that our ability to compete effectively for ~~users~~audiences and content partners depends upon many factors both within and beyond our control, including:

•the popularity, usefulness, ease of use, performance and reliability of our products and services compared to those of our ~~competitors;~~

competitors, as well as our reputation and brand, and our ability to adapt to continuously evolving preferences and expectations of people on Twitter, advertisers, content partners, platform partners and developers;

•the amount, quality and timeliness of content generated byon our ~~users and content partners;~~

platform, including the relative mix of ads;

•the timing and market acceptance of our products and services;

•the prominence of our applications in application marketplaces and of our content in search engine results, as well as those of our competitors;

•our ability, in and of itself, and in comparison to the ability of our competitors, to develop new products and services and enhancements to existing products and ~~services;~~

services, and to maintain the reliability and security of our products and services as usage increases globally;

We also face significant competition for advertiser spend. ~~The substantial majority of our revenue is currently generated through third parties advertising on Twitter, and we~~We compete against online and mobile businesses ~~including those referenced above,~~ and traditional media outlets, such as television, radio and print, for advertising budgets. In addition, many advertisers, particularly branded advertisers, use marketing mix analyses to determine how to allocate their advertising budgets on an annual or bi-annual basis. Accordingly, if we fail to demonstrate to such advertisers during the appropriate time period that we provide a better return on investment than our competitors do, we may lose the opportunity to secure, increase or sustain our share of the advertising budget allocated for a significant portion of the year until the next budget cycle.

We also compete with advertising networks, exchanges, demand side platforms and other platforms, such as Google AdSense, DoubleClick Ad Exchange, Nexage and Brightroll Ad Exchanges, ~~AOL’s Ad.com~~Verizon Media Group, and Microsoft Media Network, for marketing budgets and in the development of the tools and systems for managing and optimizing advertising campaigns. In order to grow our revenue and improve our operating results, we must increase our share of spending on advertising relative to our competitors, many of which are larger companies that offer more traditional and widely accepted advertising products. In addition, some of our larger competitors have substantially broader product or service offerings and leverage their relationships based on other products or services to gain additional share of advertising budgets.

Given our limited operating history and the rapidly evolving markets in which we compete, our historical operating results may not be useful to you in predicting our future operating results. As our revenue growth rate slows, we expect that the seasonality in our business may become more pronounceda healthy public conversation have negatively impacted, and may in the future ~~cause~~negatively impact, our publicly reported metrics in a few ways.

•political and economic instability in some countries;

•double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate; and

•higher costs of doing business internationally, including increased accounting, travel, infrastructure and legal compliance costs.

If our revenue from our international operations, and particularly from our operations in the countries and regions where we have focused our spending, does not exceed the expense of establishing and maintaining these operations, our business and operating results will suffer. In addition, mDAU may grow more rapidly than revenue in international regions where our monetization of our products and services is not as developed. For example, average mDAU outside the United States constituted 81% of our average mDAU in the three months ended September 30, 2020, but our international revenue, as determined based on the billing location of our customers, was approximately 45% of our consolidated revenue in the three months ended September 30, 2020. If we are unable to successfully expand our business, manage the complexity of our global operations ~~successfully,~~or monetize our products and services internationally could adversely impact our business, financial condition and operating ~~results could be adversely affected.~~

~~Our products and services may contain undetected software errors, which could harm our business and operating~~ results.

Our products and services incorporate complex software and we encourage employees to quickly develop and help us launch new and innovative features. Our software, including any open source software that is incorporated into our code, has contained, and may now or in the future contain, errors, bugs or vulnerabilities. For example, in February 2016, we discovered, and corrected, a bug that affected our password recovery systems for about 24 hours. Although this issue did not expose passwords or information that could be used directly to access an account, it had the potential to expose the email address and phone number associated with a small number of accounts (less than 10,000 active accounts). Some errors in our software code may only be discovered after the product or service has been released. Errors, vulnerabilities, or other design defects within the software on which we rely may result in a negative experience for users and advertisers who use our products, delay product introductions or enhancements, result in targeting, measurement, or billing errors, compromise our ability to protect the data of our users and/or our intellectual property or lead to reductions in our ability to provide some or all of our services. For example, in December 2016, we discovered and corrected a technical error in our Android application that resulted in incorrect reporting of certain video advertisement metrics for approximately one month. Any errors, bugs or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of users, loss of content or platform partners, loss of advertisers or advertising revenue or liability for damages or other relief sought in lawsuits, regulatory inquiries or other proceedings, any of which could adversely affect our business and operating results.

Our business is subject to complex and evolving U.S. and foreign laws and regulations. These laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or declines in ~~user~~mDAU growth, ~~user~~mDAU engagement or ad engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection, security, rights of publicity, ~~data protection,~~ content regulation, intellectual property, competition, protection of minors, consumer protection, credit card processing and taxation. Many of these laws and regulations are still evolving and being tested in courts. As a result, it is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent from country to country and inconsistent with our current policies and practices and in ways that could harm our business, particularly in the new and rapidly evolving industry in which we operate. Additionally, the introduction of new products or services may subject us to additional laws and regulations.

From time to time, governments, regulators and others have expressed concerns about whether our products, services or practices compromise the privacy or data protection rights of ~~users~~the people on Twitter and others. While we strive to comply with applicable privacy and data protection laws and regulations, ~~as well as~~ our ~~own posted~~ privacy policies and other obligations we may have with respect to privacy and data protection, the failure or perceived failure to so comply may result, and in some cases has resulted, in inquiries and other proceedings or actions against us by governments, regulators or others. Moreover, foreign data protection, privacy, consumer protection, content regulation and other laws and regulations are often more restrictive than those in the United States. In particular, the European Union and its member states traditionally have taken broader views as to types of data that are subject to privacy and data protection, and have imposed greater legal obligations on companies in this regard. A number of proposals have recently been adopted or are currently pending before federal, state and foreign legislative and regulatory bodies that could significantly affect our business. For example, the California Consumer Privacy Act (CCPA) went into effect on January 1, 2020. The CCPA requires, among other things, covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Similar legislation has been proposed or adopted in ~~April 2016, European legislative bodies adopted~~other states. Aspects of the ~~General Data Protection Regulation~~CCPA and these other state laws and regulations, as well as their enforcement, remain unclear, and we may be required to ~~replace European Union~~modify our practices in an effort to comply with them. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), recently was certified by the California Secretary of State to appear on the ballot for the November 3, 2020 election. If this initiative is approved by California voters, the CPRA would significantly modify the CCPA, potentially resulting in further uncertainty and ~~national~~requiring us to incur additional costs and expenses. Moreover, foreign data protection, ~~legislation effective May 2018, which includes~~privacy, consumer protection, content regulation and other laws and regulations are often more restrictive or burdensome than those in the United States. For example, the GDPR imposes stringent operational requirements for entities processing personal information and significant penalties for non-compliance, including fines of up to €20 million or 4% of total worldwide revenue, whichever is higher. Additionally, we ~~rely on~~have historically relied upon a variety of legal bases to transfer certain personal information outside of the European Economic Area, including the ~~EU-US~~EU-U.S. Privacy Shield Framework, orthe Swiss-U.S. Privacy Shield Framework, and EU Standard Contractual Clauses, or SCCs. ~~The Privacy Shield is currently under review by regulatory authorities~~These legal bases all have been, and ~~it and~~may be, the ~~SCCs are both~~ subject of legal challenges and on July 16, 2020, the Court of Justice of the European Union (CJEU) invalidated the U.S.-EU Privacy Shield framework and imposed additional obligations on companies when relying on the SCCs. This CJEU decision may result in different European ~~courts, and the absence~~Economic Area (EEA) data protection regulators applying differing standards for, or require ad hoc verification of ~~successor legal bases for continued~~measures taken with respect to, certain data ~~transfer could~~flows. The CJEU’s decision will require us to ~~create~~take additional steps to legitimize impacted personal data transfers, and we may find it necessary or desirable to modify our data handling practices in connection with this decision or future legal challenges relating to cross-border data transfers. This could result in increased costs of compliance and limitations on our customers, vendors, and us. This CJEU decision or future legal challenges also could result in us being required to implement duplicative, and potentially expensive, information technology infrastructure and business operations in Europe or could limit our ability to collect ~~and use~~or process personal information ~~collected~~ in ~~Europe.~~Europe, and may serve as a basis for our personal data handling practices, or those of our customers and vendors, to be challenged. Any of these changes with respect to EU data protection law could disrupt our ~~business.~~

business and otherwise adversely impact our business, financial condition and operating results.

Further, following a referendum in June 2016 in which ~~voters in the~~ United Kingdom (UK) voters approved an exit from the EU, ~~it is expected that~~ the ~~United Kingdom government will initiate a process to leave~~UK officially left the EU on January 31, 2020, with a transitional period set to end on December 31, 2020 (often referred to as ~~“Brexit”~~"Brexit"). The effect of Brexit will depend on agreements, if any, the UK makes to retain access to EU markets. Brexit creates economic and legal uncertainty in the region and could adversely affect the tax, currency, operational, legal and regulatory regimes to which our business is subject. Brexit may adversely affect our revenues and subject us to new regulatory costs and challenges, in addition to other adverse effects that we are unable effectively to anticipate. The UK implemented a Data Protection Act, effective in May 2018 and statutorily amended in 2019, that substantially implements the GDPR. Brexit has created uncertainty with regard to the future regulation of data protection in the United Kingdom. In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the pending EU General Data Protection RegulationUK and ~~how~~requirements for data transfers tobetween the UK and ~~from~~ the ~~United Kingdom will be regulated.~~

~~Similarly, there have been a number of recent legislative proposals~~EU and other jurisdictions.

Legislative changes in the United States, at both the federal and state level, ~~that~~ could impose new obligations in areas such as privacy and moderation of content posted on our platform by third parties, including with respect to requests for removal based on claims of copyright. Further, there are various Executive and Congressional efforts to restrict the scope of the protections from legal liability for ~~copyright infringement by third parties. The U.S. government, including~~content moderation decisions and third-party content posted on online platforms that are currently available to online platforms under Section 230 of the ~~FTC~~Communications Decency Act, and our current protections from liability for content moderation decisions and third-party content posted on our platform in the ~~Department of Commerce, has announced that it is reviewing the need~~United States could decrease or change, potentially resulting in increased liability for ~~greater regulation for the collection of information concerning user behavior~~content moderation decisions and third-party content posted on ~~the Internet, including regulation aimed at restricting certain online tracking~~our platform and ~~targeted advertising practices.~~higher litigation costs. Additionally, recent amendments to U.S. patent laws may affect the ability of companies, including us, to protect their innovations and defend against claims of patent infringement.

In April 2019, the EU passed the Directive on Copyright in the Digital Single Market (the EU Copyright Directive), which expands the liability of online platforms for third-party content posted on the platform. Each EU member state has two years to implement it. The EU Copyright Directive may increase our costs of operations, our liability for third-party content posted on our platform, and our litigation costs.

Additionally, we have relationships with third parties that perform a variety of functions such as payments processing, tokenization, vaulting, currency conversion, fraud prevention and data security audits. The laws and regulations related to online payments and other activities of these third parties, including those relating to the processing of data, are complex, subject to change, and vary across different jurisdictions in the United States and globally. As a result, we may be required to spend significant time, effort and expense to comply with applicable laws and regulations. Any failure or claim of our failure to comply, or any failure or claim of failure by the above-mentioned third parties to comply, could increase our costs or could result in liabilities. Additionally, because ~~Twitter accepts~~we accept payment via credit cards, ~~and is certified as a PCI Level 1 service provider,~~ we are subject to ~~payment card association~~global payments industry operating rules and certification requirements governed by PCI Security Standards Council, including the Payment Card Industry Data Security Standard.

Any failure by us to comply with these operating rules and certification requirements also may result in costs and liabilities and may result in us losing our ability to accept certain payment cards.

The U.S. and foreign laws and regulations described above, as well as any associated inquiries or investigations or any other regulatory actions, may be costly to comply with and may delay or impede the development of new products and services, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may result in a loss of mDAU or advertisers and otherwise harm our business, including fines or demands or orders that we modify or cease existing business practices.

We currently allow use of our platform without the collection of extensive personal ~~information, such as age.~~information. We may experience additional pressure to expand our collection of personal information in order to comply with new and additional legal or regulatory demands or we may independently decide to do so. If we obtain such additional personal information, we may be subject to additional ~~regulation.~~

legal or regulatory obligations.

Regulatory investigations and settlements could cause us to incur additional expenses or change our business practices in a manner ~~materially~~material and adverse to our business.

From time to time we notify the Irish Data Protection Commission and other regulators of certain personal data breaches and privacy or data protection issues, and are subject to inquiries and investigations regarding various aspects of our regulatory compliance. We are currently the subject of inquiries by the Irish Data Protection Commission with respect to our compliance with the GDPR. In the past, we have been subject to regulatory investigations, ~~in the past,~~ and we expect to continue to be subject to regulatory scrutiny as our business grows and awareness of our brand increases.

In March 2011, to resolve an investigation into various incidents, we entered into a ~~settlement agreement~~consent order with the FTC that, among other things, required us to establish an information security program designed to protect non-public consumer information and also requires that we obtain biennial independent security assessments. The obligations under the ~~settlement agreement~~consent order remain in effect until the later of March 2, 2031, or the date 20 years after the date, if any, on which the U.S. government or the FTC files a complaint in federal court alleging any violation of the order. We expect to continue to be the subject of regulatory inquiries, investigations and audits in the future by the FTC and other regulators around the world.

It is possible that a regulatory inquiry, investigation or audit might result in changes to our policies or practices, and may cause us to incur substantial costs or could result in reputational harm, prevent us from offering certain products, services, features or functionalities, cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business. Violation of existing or future regulatory orders, settlements or consent decrees could subject us to substantial ~~monetary~~ fines and other penalties that ~~could negatively affect~~would adversely impact our financial condition and operating results.

If For example, on July 28, 2020, we received a draft complaint from the FTC alleging violations of the 2011 consent order with the FTC and the FTC Act. The allegations relate to our use of phone number and/or email address data provided for safety and security ~~measures are breached,~~purposes for targeted advertising during periods between 2013 and 2019. We estimate that the range of probable loss in this matter is $150.0 million to $250.0 million. The matter remains unresolved, and there can be no assurance as to the timing or ifthe terms of any final outcome.

It is possible that a regulatory inquiry, investigation or audit could cause us to incur substantial fines and costs, result in reputational harm, prevent us from offering certain products, services, features or functionalities, require us to change our ~~products~~policies or practices, divert management and services are subject to attacks that degrade or deny the ability of users to access our products and services, our products and services may be perceived as not being secure, users and advertisers may curtail or stop using our products and services andother resources from our business, or otherwise materially and ~~operating results could be harmed.~~

Our products and services involve the storage and transmission of users’ and advertisers’ information, and security breaches expose us to a risk of loss of this information, litigation, increased security costs and potential liability. We also work with third-party vendors to process credit card payments by our customers and are subject to payment card association operating rules. We and our third-party service providers experience cyber-attacks of varying degrees on a regular basis. For example, in October 2016, we experienced a service outage as a result of several distributed denial of service attacks on our domain name service provider, Dyn. Third parties may also gain access to Twitter user names and passwords without attacking Twitter directly by combining credential information from other recent breaches, using malware on victim machines that are stealing passwords for all sites, or a combination of both. In addition, some of our developers or other partners, such as third party applications to which our users have given permission to Tweet on their behalf, may receive or store information provided by us or by our users through mobile or web applications integrated with us. If these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, our data or our users' data may be improperly accessed, used, or disclosed.

As a result, unauthorized parties have obtained, and may in the future obtain, access to our data or our users’ or advertisers’ data. For example, we have previously disclosed that sophisticated unknown third parties had attacked our systems and may have had access to limited information for small subset of our users. Any systems failure or actual or perceived compromise of our security that results in the unauthorized access to or release of our users’ or advertisers’ data, such as credit card data, could significantly limit the adoption of our products and services, as well as harm our reputation and brand and, therefore, our business.

Our security measures may also be breached due to employee error, malfeasance or otherwise. Additionally, outside parties may attempt to fraudulently induce employees, users or advertisers to disclose sensitive information in order to gain access to our data or our users’ or advertisers’ data or accounts, or may otherwise obtain access to such data or accounts. Since our users and advertisers may use their Twitter accounts to establish and maintain online identities, unauthorized communications from Twitter accounts that have been compromised may damage their reputations and brands as well as ours. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, our users and advertisers may be harmed, lose trust and confidence in us, decrease the use of our products and services or stop using our products and services in their entirety. We may also incur significant legal and financial exposure, including legal claims, higher transaction fees and regulatory fines and penalties. Any of these actions could have a material and adverse effect onadversely impact our business, ~~reputation~~financial condition and operating results.

We may face lawsuits or incur liability as a result of content published or made available through our products and services.

We have faced and will continue to face claims relating to content that is published or made available through our products and services or ~~third party~~third-party products or services. In particular, the nature of our business exposes us to claims related to defamation, intellectual property rights, rights of publicity and privacy, illegal content, misinformation, content regulation and personal injury torts. The laws relating to the liability of providers of online products or services for activities of ~~their users~~the people who use them remains somewhat unsettled, both within the United States and internationally. This risk may be enhanced in certain jurisdictions outside the United States where we may be less protected under local laws than we are in the United States. For example, we ~~will be~~are subject to ~~recently enacted~~ legislation in Germany that may impose significant fines for failure to comply with certain content removal and disclosure obligations. Other countries, including Singapore, India, Australia, and the United Kingdom, have implemented or are considering similar legislation imposing penalties for failure to remove certain types of content. In addition, the public nature of communications on our ~~network~~platform exposes us to risks arising from the creation of impersonation accounts intended to be attributed to people on Twitter or our ~~users or~~ advertisers. We could incur significant costs investigating and defending these claims. If we incur material costs or liability as a result of these occurrences, our business, financial condition and operating results ~~could~~would be adversely ~~affected.~~

impacted.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.

~~Our~~

Intellectual property rights are important assets of our business and we seek protection for such rights as appropriate. To establish and protect our trade secrets, trademarks, copyrights, and patents as well as restrictions in confidentiality, license and ~~other~~ intellectual property ~~rights are important assets. We rely on, and expect to continue to rely on, a combination of confidentiality and license~~assignment agreements we enter into with our employees, consultants and third ~~parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret~~parties. Various circumstances and ~~patent laws, to protect our brand and other intellectual property rights. However, various~~ events outside of our control, however, pose ~~a threat~~threats to our intellectual property ~~rights, as well as to our products, services and technologies. For example, we~~rights. We may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are ~~available.~~available, or such laws may provide only limited protection. Also, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, circumvented, infringed or misappropriated which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and compete with our business.

We rely on non-patented proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. While in certain cases we have agreements in place with employees and third parties that place restrictions on the use and disclosure of ~~this intellectual property, these~~our trade secrets and other proprietary information contained in agreements we sign with our employees, contractors, and other third parties to limit and control access to and disclosure of our trade secrets and confidential information. These agreements may be breached, or this intellectual property may otherwise be disclosed or become known to our competitors, including through hacking or theft, which could cause us to lose any competitive advantage resulting from ~~this intellectual property.~~

these trade secrets and proprietary information.

We are pursuing registration of trademarks and domain names in the United States and in certain jurisdictions outside of the United States. Effective protection of trademarks and domain names is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. We may be required to protect our rights in an increasing number of countries, a process that is expensive and may not be successful or which we may not pursue in every country in which our products and services are distributed or made available.

We are party to numerous agreements that grant licenses to third parties to use our intellectual ~~property, including our trademarks.~~property. For example, many third parties distribute their content through Twitter, or embed Twitter content in their applications or on their websites, and make use of our trademarks in connection with their services. If the licensees of our trademarks are not using our trademarks properly, it may limit our ability to protect our trademarks and could ultimately result in our trademarks being declared invalid or unenforceable. We have a policy designed to assist third parties in the proper use of our ~~brand,~~ trademarks, and ~~other assets, and we have~~ an internal team dedicated to enforcing ~~our~~this policy and protecting our brand. ~~Our brand protection~~This team routinely ~~receives and~~ reviews reports of improper and unauthorized use of the Twitter ~~brand,~~ trademarks ~~or assets~~ and issues takedown notices or initiates discussions with the third parties to correct the issues. However, there can be no assurance that we will be able to protect against the unauthorized use of our brand or trademarks. If the licensees of our trademarks ~~or other assets. If~~are not using our trademarks properly and we fail to maintain and enforce our trademark rights, we may limit our ability to protect our trademarks which could result in diminishing the value of our brand ~~could be diminished.~~or in our trademarks being declared invalid or unenforceable. There is also a risk that one or more of our trademarks could become generic, which could result in ~~them~~such trademark being declared invalid or unenforceable. For example, there is a risk that the word “Tweet” could become so commonly used that it becomes synonymous with any short comment posted publicly on the Internet, and if this happens, we could lose protection of this trademark.

We also seek to obtain patent protection for some of our ~~technology and as of September 30, 2017, we had 1,041 issued U.S. patents.~~technology. We may be unable to obtain patent protection for our ~~technologies, and~~technologies. Even if patents are issued from our patent applications, which is not certain, our existing patents, and any patents that may be issued in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. In addition, any patents may be contested, circumvented, or found unenforceable or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them. Effective protection of patent rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights.

Our Innovator’s Patent Agreement, or IPA, also ~~limits~~can limit our ability to prevent infringement of our patents. In May 2013, we implemented the IPA, which we enter into with our employees and consultants, including our founders. The IPA, which applies to our current and future patents, allows us to assert our patents defensively. The IPA also allows us to assert our patents offensively with the permission of the inventors of the applicable patent. Under the IPA, an assertion of claims is considered to be for a defensive purpose if the claims are asserted: (i) against an entity that has filed, maintained, threatened or voluntarily participated in a patent infringement lawsuit against us or any people on Twitter, or any of our ~~users,~~ affiliates, customers, suppliers or distributors; (ii) against an entity that has used its patents offensively against any other party in the past ten years, so long as the entity has not instituted the patent infringement lawsuit defensively in response to a patent litigation threat against the entity; or (iii) otherwise to deter a patent litigation threat against us or people on Twitter, or any of our ~~users,~~ affiliates, customers, suppliers or distributors. In addition, the IPA provides that the above limitations apply to any future owner or exclusive licensee of any of our patents, which could limit our ability to sell or license our patents to third parties. ~~While~~In this case, while we may be able to claim protection of our intellectual property under other rights ~~such~~(such as trade secrets or contractual obligations with our employees not to disclose or use confidential ~~information,~~information), we may be unable to assert our patent rights against third parties that we believe are infringing our patents, even if such third parties are developing products and services that compete with our products and services. For example, in the event that an inventor of one of our patents ~~leaves us~~goes to work for another company and that company uses ~~our~~the inventor’s patented ~~technology~~invention to compete with us, we would not be able to assert that patent against such other company unless the assertion of the patent right is for a defensive ~~purpose.~~purpose since it would be unlikely the employee would consent to offensive use of the patent against his or her current employer. In such event, we ~~may be limited in our ability to assert a patent right against another company, and instead~~ would need to rely on trade secret protection or the contractual obligation of the inventor to us not to disclose or use our confidential information. In addition, the terms of the IPA could affect our ability to monetize our intellectual property portfolio.

Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could harm our business and our ability to compete.

Also, obtaining, maintaining and enforcing our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property ~~could make it more expensive to do~~would adversely impact our business, financial condition and ~~harm our~~ operating results.

We are currently, and expect to be in the future, party to intellectual property rights claims that are expensive and time consuming to defend, and, if resolved adversely, ~~could have a significant~~would adversely impact on our business, financial condition orand operating results.

Companies in the internet, technology and media industries are subject to litigation based on allegations of infringement, misappropriation or other violations of intellectual property ~~or other~~ rights. Many companies in these industries, including many of our competitors, have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent, or other intellectual property infringement. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to assert claims in order to extract value from technology companies. From time to time we receive claims from third parties which allege that we have infringed upon their intellectual property rights. Further, from time to time we may introduce new products, product features and services, including in areas where we currently do not have an offering, which could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities. In addition, although our standard terms and conditions for our Promoted Products and public APIs do not provide advertisers and platform partners with indemnification for intellectual property claims against them, some of our agreements with advertisers, content partners, platform partners and data partners require us to indemnify them for certain intellectual property claims against them, which could require us to incur considerable costs in defending such claims, and may require us to pay significant damages in the event of an adverse ruling. Such advertisers, content partners, platform partners and data partners may also discontinue use of our products, services and technologies as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business.

We presently are involved in a number of intellectual property lawsuits, and as we face increasing competition and ~~gain an increasingly high profile and~~ develop new products, we expect the number of patent and other intellectual property claims against us tomay grow. There may be intellectual property or other rights held by others, including issued or pending patents, that cover significant aspects of our products and services, and we cannot be sure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the future. Any claim or litigation alleging that we have infringed or otherwise violated intellectual property or other rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of our management and technical personnel. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. The outcome of any litigation is inherently uncertain, and there can be no assurances that favorable final outcomes will be obtained in all cases. In addition, plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are unfavorable to us. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. In addition, we may have to seek a license to continue practices found to be in violation of a third-party’s rights. If we are required, or choose to enter into royalty or licensing arrangements, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternative non-infringing technology, which could require significant effort and expense or discontinue use of the technology. An unfavorable resolution of the disputes and litigation referred to above ~~could~~would adversely ~~affect~~impact our business, financial condition and operating results.

We have incurred significant operating losses in the past, and we may not be able to maintain profitability or accurately predict fluctuations in our operating results from quarter to quarter.

In the nine months ended September 30, 2020, as well as other periods in the past, we have incurred significant operating losses. While we were profitable on a GAAP basis for 2018 and 2019, our quarterly operating results have fluctuated in the past and will fluctuate in the future. As a result, our past quarterly operating results are not necessarily indicators of future performance. Our operating results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:

•our ability to attract and retain mDAU, advertisers, content partners and platform partners;

•the occurrence of planned significant events or changes to the timing of events, such as major sporting events, political elections, or awards shows, or unplanned significant events, such as natural disasters and political revolutions, as well as seasonality which may differ from our expectations;

•the impacts of the COVID-19 pandemic and governmental and business actions in response thereto on the global economy;

•the pricing of our advertising services or data licensing, and our ability to maintain or improve revenue and margins;

•the development and introduction of new products or services, changes in features of existing products or services or de-emphasis or termination of existing products, product features or services;

•the actions of our competitors;

•increases in research and development, marketing and sales and other operating expenses that we may incur to grow and expand our operations and to remain competitive, including stock-based compensation expense and costs related to our technology infrastructure;

•costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs;

•system failures resulting in the inaccessibility of our products and services;

•actual or perceived breaches of security or privacy, and the costs associated with remediating any such breaches;

•adverse litigation judgments, settlements or other litigation-related costs, and the fees associated with investigating and defending claims;

•changes in the legislative or regulatory environment, including with respect to security, tax, privacy, data protection, or content, or enforcement by government regulators, including fines, orders or consent decrees;

•changes in reserves or other non-cash credits or charges, such as establishment or releases of deferred tax assets valuation allowance, impairment charges or purchase accounting adjustments;

•changes in our expected estimated useful life of property and equipment and intangible assets;

•fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;

•changes in U.S. generally accepted accounting principles; and

•changes in global or regional business or macroeconomic conditions.

Given the rapidly evolving markets in which we compete, our historical operating results may not be useful to you in predicting our future operating results. If our revenue growth rate slows, we expect that the seasonality in our business may become more pronounced and may in the future cause our operating results to fluctuate. For example, advertising spending is traditionally seasonally strong in the fourth quarter of each year, and we believe that this seasonality affects our quarterly results, which generally reflect higher sequential advertising revenue growth from the third to fourth quarter compared to sequential advertising revenue growth from the fourth quarter to the subsequent first quarter. Additionally, certain new revenue products or product features may carry higher costs relative to our other products, which may decrease our margins, and we may incur increased costs to scale our operations if mDAU and engagement on our platform increase. If we are unable to generate adequate revenue growth and to manage our expenses, we may incur significant losses in future periods and may not be able to maintain profitability.

Many of our products and services contain open source software, and we license some of our software through open source projects, which may pose particular risks to our proprietary software, products, and services in a manner that could ~~have a negative effect on~~adversely impact our business.

We use open source software in our products and services and will use open source software in the future. In addition, we regularly contribute software source code to open source projects under open source licenses or release internal software projects under open source licenses, and anticipate doing so in the future. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, under some open source licenses, if we ~~may from time to time face claims from~~combine our proprietary software with open source software in a certain manner, third parties ~~claiming~~may claim ownership of, or ~~demanding~~demand release of, the open source software or derivative works that we developed using such software, which could include our proprietary source ~~code, or otherwise seeking~~code. Such third parties may also seek to enforce the terms of the applicable open source ~~license. These claims could result in~~license through litigation ~~and~~which, if successful, could require us to make our proprietary software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. In addition to risks related to open source license requirements, use of certain open source software may pose greater risks than use of third-party commercial software, assince open source licensors generally do not provide warranties or controls on the origin of software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could ~~have a negative effect on~~adversely impact our business, financial condition and operating results.

~~We may require additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all.~~

From time to time, we may need additional financing to operate or grow our business. Our ability to obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors, and we cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our existing stockholders may experience dilution. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.

We rely on assumptions and estimates to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

~~The number of~~

We calculate our ~~active users is calculated~~mDAU using internal company data that has not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, there are inherent challenges in measuring ~~usage~~mDAU and ~~user engagement across our large user base around the world.~~mDAU engagement. For example, there are a number of false or spam accounts in existence on our platform. We estimate that the average of false or spam accounts during the third quarter of 2020 continued to represent ~~less~~fewer than 5% of our ~~MAUs as of December 31, 2016.~~mDAU during the quarter. However, this estimate is based on an internal review of a sample of accounts and we apply significant judgment in making this determination. As such, our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have currently estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our ~~active users,~~mDAU, but we otherwise treat multiple accounts held by a single person or organization as multiple ~~users~~accounts for purposes of calculating our ~~active users~~mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our ~~active users~~mDAU may not accurately reflect the actual number of people or organizations using our platform. We may also discover unexpected errors in our internal data that resulted from technical or other errors. For example, we discovered that since the fourth quarter of 2014 we had included users of certain third-party applications as Twitter MAUs that should not have been considered MAUs. These third-party applications used Digits, a software development kit of our now-divested Fabric platform, that allowed third-party applications to send authentication messages via SMS through our systems, which did not relate to activity on the Twitter platform. Although the change in the MAUs was relatively small in relation to our overall MAU numbers, we may face increased scrutiny as a result of the error.

Our metrics are also affected by mobile applications that automatically contact our servers for regular updates with no discernable user-initiated action involved, and this activity can cause our system to count the user associated with such a device as an active user on the day such contact occurs. The calculations of MAUs and DAUs presented in this Quarterly Report on Form 10-Q may be affected by this activity. The impact of this automatic activity on our metrics varies by geography because mobile application usage varies in different regions of the world. In addition, our data regarding user geographic location is based on the IP address or phone number associated with the account when a user initially registered the account on Twitter. That IP address or phone number may not always accurately reflect a user’s actual location at the time of such user’s engagement on our platform.

We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. ~~We present and discuss our total audience based on both internal metrics and data from Google Analytics, which measures unique visitors to our properties.~~ Our measures of ~~user~~mDAU growth and ~~user~~ engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology. If advertisers, content or platform partners or investors do not perceive our ~~user~~ metrics to be accurate representations of our ~~user base~~total accounts or ~~user~~mDAU engagement, or if we discover material inaccuracies in our ~~user~~ metrics, our reputation may be harmed and content partners, advertisers and platform partners may be less willing to allocate their budgets or resources to our products and services, which could negatively affect our business and operating results. Further, as our business develops, we may revise or cease reporting metrics if we determine that such metrics are no longer accurate or appropriate measures of our performance. For example, we ~~stopped~~believe that mDAU, and its related growth, are the best ways to measure our success against our objectives and to show the size of our audience and engagement going forward, so we discontinued disclosing ~~timeline views as we no longer believed that metric was helpful in measuring engagement on our platform.~~monthly active usage after the first quarter of 2019. If investors, analysts or customers do not believe our reported measures, ~~of user engagement~~such as mDAU, are sufficient or accurately reflect our business, we may receive negative publicity and our operating results may be ~~harmed.~~

~~Spam could diminish the user experience on our platform, which could damage our reputation and deter our current and potential users from using our products and services.~~

“Spam” on Twitter refers to a range of abusive activities that are prohibited by our terms of service and is generally defined as unsolicited, repeated actions that negatively impact other users with the general goal of drawing user attention to a given account, site, product or idea. This includes posting large numbers of unsolicited mentions of a user, duplicate Tweets, misleading links (e.g., to malware or “click-jacking” pages) or other false or misleading content, and aggressively following and un-following accounts, adding users to lists, sending invitations, Retweeting and liking Tweets to inappropriately attract attention. Our terms of service also prohibit the creation of serial or bulk accounts, both manually or using automation, for disruptive or abusive purposes, such as to tweet spam or to artificially inflate the popularity of users seeking to promote themselves on Twitter. Although we continue to invest resources to reduce spam on Twitter, we expect spammers will continue to seek ways to act inappropriately on our platform. In addition, we expect that increases in the number of users on our platform will result in increased efforts by spammers to misuse our platform. We continuously combat spam, including by suspending or terminating accounts we believe to be spammers and launching algorithmic changes focused on curbing abusive activities. Our actions to combat spam require the diversion of significant time and focus of our engineering team from improving our products and services. If spam increases on Twitter, this could hurt our reputation for delivering relevant content or reduce user growth and user engagement and result in continuing operational cost to us.

We rely in part on application marketplaces and Internet search engines to drive traffic to our products and services, and if we fail to appear high up in the search results or rankings, traffic to our platform could decline and our business and operating results could be adversely ~~affected.~~

We rely on application marketplaces, such as Apple’s App Store and Google’s Play, to drive downloads of our mobile applications. In the future, Apple, Google or other operators of application marketplaces may make changes to their marketplaces which make access to our products and services more difficult or limit our use of data to provide targeted advertising. We also depend in part on Internet search engines, such as Google, Apple Spotlight, Bing and Yahoo, to drive traffic to our website. For example, when a user types an inquiry into a search engine, we rely on a high organic search result ranking of our webpages in these search results to refer the user to our website. However, our ability to maintain high organic search result rankings is not within our control. Our competitors’ search engine optimization, or SEO, efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If Internet search engines modify their search algorithms in ways that are detrimental to us, or if our competitors’ SEO efforts are more successful than ours, the growth in our user base could slow. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our mobile applications or website through application marketplaces and search engines could harm our business and operating results.

More people are using devices other than personal computers to access the Internet and new platforms to produce and consume content, and we need to continue to promote the adoption of our mobile applications, and our business and operating results may be harmed if we are unable to do so.

The number of people who access the Internet through devices other than personal computers, including mobile phones, tablets, video game consoles and television set-top devices, has increased dramatically in the past few years. In the nine months ended September 30, 2017, 92% of our advertising revenue was generated from mobile devices. Since we generate a majority of our advertising revenue through users on mobile devices, we must continue to drive adoption of our mobile applications. However, in emerging markets like India and Pakistan, a significant portion of users use feature phones and communicate via SMS messaging, both of which have limited functionality and neither of which may be able to take full advantage of our products and services offered on smartphone or our website or desktop applications. In addition, mobile users frequently change or upgrade their mobile devices. Our business and operating results may be harmed if our users do not install our mobile application when they change or upgrade their mobile device. Although we generate the majority of our advertising revenue from ad engagements on mobile devices, certain of our products and services, including Promoted Trends and Promoted Accounts, receive less prominence on our mobile applications than they do on our desktop applications. This has in the past reduced, and may in the future continue to reduce, the amount of revenue we are able to generate from these products and services as users increasingly access our products and services through mobile and alternative devices. In addition, as new devices and platforms are continually being released, users may consume content in a manner that is more difficult to monetize. If we are unable to develop products and services that are compatible with new devices and platforms, or if we are unable to drive continued adoption of our mobile applications, our business and operating results may be harmed.

impacted.

Acquisitions, divestitures and investments could disrupt our business and harm our financial condition and operating results.

Our success will depend, in part, on our ability to expand our products, product features and services, and grow our business in response to changing technologies, ~~user~~demands of people on Twitter and ~~advertiser demands,~~our advertisers and competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses and technologies rather than through internal development, including, for example, our acquisitions of Periscope, a live-streaming video mobile application, and MoPub, a mobile-focused advertising ~~exchange; and TellApart, Inc., a marketing technology company providing retailers and e-commerce advertisers with unique retargeting capabilities.~~exchange. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions include:

•diversion of management time and focus from operating our business to addressing acquisition integration challenges;

•retention of key employees from the acquired company;

•cultural challenges associated with integrating employees from the acquired company into our organization;

•integration of the acquired company’s accounting, management information, human resources and other administrative systems and processes;

•the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls, procedures and policies;

•liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

•unanticipated write-offs or charges; and

•litigation or other claims in connection with the acquired company, including claims from terminated employees, ~~users,~~ former stockholders or other third parties.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the impairment of goodwill, any of which could ~~harm~~adversely impact our financial condition orand operating results.

We also make investments in privately-held companies in furtherance of our strategic objectives. ~~We may not realize a return and may recognize a loss on such investments.~~ Many of the instruments in which we invest are non-marketable at the time of our initial investment. ~~Companies in which we invest range from early-stage companies still defining their strategic direction to more mature companies with established revenue streams~~We may not realize a return and ~~business models. The success of our investment in any company is typically dependent~~may recognize a loss on ~~the availability to the company of additional funding on favorable terms, or a liquidity event,~~ such as a public offering or acquisition. If any of the companies in which we invest decrease in value, we could lose all or part of our investment. For example, in the nine months ended September 30, 2017, we recorded a $62.4 million cost-method investment impairment charge relating to an investment in a privately-held company.

investments.

In certain cases, we have also divested or stopped investing in certain ~~products. For instance, in January 2017, we divested certain assets related to our Fabric platform. In 2017, we also de-emphasized certain of our revenue~~ products, including ~~TellApart.~~products that we acquired. In these cases, we have needed to and we may in the future need to restructure operations, terminate employees and/or incur other expenses. We may not realize the expected benefits and cost savings of these actions and our operating results may be ~~harmed.~~

adversely impacted.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and the listing standards of the New York Stock Exchange. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could cause us to be subject to one or more investigations or enforcement actions by state or federal regulatory agencies, stockholder lawsuits or other adverse actions requiring us to incur defense costs, pay fines, settlements or judgments. Any such failures could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.

~~If currency exchange rates fluctuate substantially in the future,~~

Our debt obligations could adversely affect our ~~operating results, which are reported in U.S. dollars, could be adversely affected.~~

Our international operations expose us to the effects of fluctuations in currency exchange rates. We incur expenses for employee compensation and other operating expenses at our international locations in the local currency, and accept payment from advertisers or data partners in currencies other than the U.S. dollar. Since we conduct business in currencies other than U.S. dollars but report our operating results in U.S. dollars, we face exposure to fluctuations in currency exchange rates. While we enter into foreign currency forward contracts with financial institutions to reduce the risk that our earnings may be adversely affected by the impact of exchange rate fluctuations on monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary, exchange rate fluctuations between the U.S. dollar and other currencies could have a material impact on our operating results.

Servicing our convertible senior notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under such notes, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of such notes.

condition.

In 2014, we issued ~~$935.0 million in aggregate principal amount of 0.25% convertible senior notes due 2019, or the 2019 Notes, and~~ $954.0 million in aggregate principal amount of 1.00% convertible senior notes due 2021, or the 2021 Notes, ~~and together with the 2019 Notes, the Notes,~~ in private placements to qualified institutional buyers. In 2018, we issued an additional $1.15 billion in aggregate principal amount of 0.25% convertible senior notes due 2024, or the 2024 Notes, in a private placement to qualified institutional buyers. In December 2019, we issued $700.0 million in aggregate principal amount of 3.875% senior notes due 2027, which we refer to as the 2027 Notes. In March 2020, we issued $1.0 billion in aggregate principal amount of 0.375% convertible senior notes due 2025, or the 2025 Notes. We refer to the 2021 Notes, the 2024 Notes and the 2025 Notes as the Convertible Notes, and we refer to the Convertible Notes and the 2027 Notes as the Notes. As of September 30, ~~2017,~~2020, we had ~~a total par value of $1.89~~$3.80 billion in aggregate principal amount of outstanding Notes.

~~Holders~~ As of September 30, 2020, we also had an undrawn unsecured revolving credit facility providing for loans in the ~~Notes will have the right under the indenture for the Notes to~~ aggregate principal amount of $500.0 million.

Our debt obligations could adversely impact us. For example, these obligations could:

•require us to ~~repurchase all or~~use a substantial portion of ~~their notes~~our cash flow from operations to pay principal and interest on debt, including the Notes, or to repurchase our Notes when required upon the occurrence of ~~a fundamental~~certain change ~~before~~of control events or otherwise pursuant to the ~~relevant maturity date, in each case at a repurchase price equal to 100% of~~terms thereof, which will reduce the ~~principal~~ amount of ~~the Notes, plus accrued~~cash flow available to fund working capital, capital expenditures, acquisitions, and ~~unpaid interest, if any,~~other business activities;

•require us to ~~the fundamental change repurchase date. In addition, upon conversion of the Notes, unless we elect to deliver solely~~use cash and/or issue shares of our common stock to settle ~~such~~any conversion ~~(other than paying cash~~obligations of the Convertible Notes;

•result in ~~lieu~~certain of ~~delivering any fractional shares), we will be required to make cash payments in respect of~~our debt instruments, including the Notes, being ~~converted. Moreover, we will~~accelerated or being deemed to be ~~required~~in default if certain terms of default are triggered, such as applicable cross payment default and/or cross-acceleration provisions;

•adversely impact our credit rating, which could increase future borrowing costs;

•limit our future ability to ~~repay~~raise funds for capital expenditures, strategic acquisitions or business opportunities, and other general corporate requirements;

•restrict our ability to create or incur liens and enter into sale-leaseback financing transactions;

•increase our vulnerability to adverse economic and industry conditions;

•with respect to indebtedness other than the ~~notes~~Notes, increase our exposure to interest rate risk from variable rate indebtedness;

•dilute our earnings per share as a result of the conversion provisions in ~~cash~~the Convertible Notes; and

•place us at ~~their maturity, unless earlier converted or repurchased.~~

a competitive disadvantage compared to our less leveraged competitors.

Our ability to ~~refinance the Notes, make~~meet our payment obligations under our debt instruments depends on our ability to generate significant cash ~~payments in connection with conversions of the Notes or repurchase the Notes~~flows in the ~~event of a fundamental change will depend on market conditions and our future performance, which~~future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. We also may not use the cash we have raised through the issuance of the Notes in an optimally productive and profitable manner. However, since inception we have incurred significant operating losses and we historically had not beenThere can be no assurance that our business will generate cash flow ~~positive~~from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to not ~~be in the future. As a result, we may not have enough available cash or~~ be able to ~~obtain financing~~satisfy applicable draw-down conditions and utilize our revolving credit facility. If we are unable to generate sufficient cash flows to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives on commercially reasonable terms or at all, ~~at the time~~ we are required to make repurchases of notes surrendered therefor or pay cash with respect to notes being converted or at their maturity and our level of indebtedness could adversely affect our future operations by increasing our vulnerability to adverse changes in general economic and industry conditions and by limiting or prohibiting our ability to obtain additional financing for future capital expenditures, acquisitions and general corporate and other purposes. In addition, if we aremay be unable to ~~make cash payments upon conversion of the Notes we would be required to issue significant amounts of~~meet our ~~common stock,~~debt payment obligations, which would be dilutive to existing stockholders. If we do not have sufficient cash to repurchase the Notes following a fundamental change, we would be in default under the terms of the Notes, which could seriously harmmaterially and adversely impact our ~~business. In addition, the terms of the Notes do not limit the amount of future indebtedness we may incur. If we incur significantly more debt, this could intensify the risks described above.~~

business, financial condition and operating results.

Our business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man-made problems such as terrorism.

A significant natural disaster, such as the COVID-19 pandemic or an earthquake, fire, flood or significant power outage could have a material adverse impact on our business, operating results, and financial condition. For example, the COVID-19 pandemic has led to certain business disruptions as described in our other risk factors, including travel bans and restrictions, shelter-in-place orders and the postponement or cancellation or major events, which have adversely affected demand for our advertising products and the economy as a whole, and which may continue to have an adverse effect on our business, financial condition and operating results. Our headquarters and certain of our co-located data center facilities are located in the San Francisco Bay Area, a region known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our data centers could result in lengthy interruptions in our services. In addition, acts of terrorism and other geo-political unrest could cause disruptions in our business. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate. We have implemented a disaster recovery program, which allows us to move production to a back-up data center in the event of a catastrophe. Although this program is functional, we do not currently serve network traffic equally from each data center, so if our primary data center shuts down, there will be a period of time that our products or services, or certain of our products or services, will remain inaccessible ~~to our users~~ or ~~our users~~people may experience severe issues accessing our products and services.

We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to our business that may result from interruptions in our ability to provide our products and services.

Any such natural disaster or man-made problem could adversely impact our business, financial condition and operating results.

We may have exposure to greater than anticipated tax liabilities, which could adversely impact our operating results.

Our income tax obligations are based in part on our corporate operating structure, including the manner in which we develop, value and use our intellectual property and the scope of our international operations. The tax laws applicable to our international business activities, including the laws of the United States and other jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology (or other intangible assets) or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial condition and operating results. On October 5, 2015, the Organization for Economic Cooperation and Development (OECD), an international association of thirty four countries, including the U.S. and UK, released the final reports from its Base Erosion and Profit Shifting (BEPS) Action Plans. The BEPS recommendations covered a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules and tax treaties. Future tax reform resulting from this development may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. We are subject to review and audit by ~~U.S. federal~~tax authorities in the United States (federal and ~~state~~state), Ireland, and other foreign ~~tax authorities.~~jurisdictions and the laws in those jurisdictions are subject to interpretation. Tax authorities may disagree with ~~certain~~and challenge some of the positions we have taken and any adverse outcome of such ~~a review or~~an audit could have a negative effect on our financial position and operating results. In addition, our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations or accounting principles, as well as certain discrete items. ~~Greater than anticipated~~For example, the legislation commonly referred to as the 2017 Tax Cuts and Jobs Act significantly affected U.S. tax ~~expenses, or disputes with~~law by changing how U.S. income tax ~~authorities,~~is assessed on multinational corporations. The U.S. Department of Treasury has issued and will continue to issue regulations and interpretive guidance that may significantly impact how we will apply the law and impact our results of operations.

In addition, the Organization for Economic Cooperation and Development (OECD) has published proposals covering a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules, tax treaties and taxation of the digital economy. Future tax reform resulting from this development may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. In 2018, the European Commission proposed a series of measures aimed at ensuring a fair and efficient taxation of digital businesses operating within the European Union. Some countries, in the European Union and beyond, have unilaterally moved to introduce their own digital services tax (DST) to capture tax revenue on digital services more immediately. Notably France, Italy, Austria, the United Kingdom, Turkey, India and Spain have enacted or will soon enact a digital tax. Such laws may increase our tax obligations in those countries or change the manner in which we operate our business.

On June 7, 2019, the Ninth Circuit Court of Appeals issued a new opinion in the case of Altera Corp. v. Commissioner, which upheld Department of Treasury regulations which require related parties in an intercompany cost-sharing arrangement to share expenses related to stock-based compensation. We have prepared the consolidated financial statements consistent with this opinion. In February 2020, Altera Corp. filed a petition to appeal the decision with the Supreme Court of the United States. On June 22, 2020, the Supreme Court denied the petition. Subsequent to September 30, 2020 but prior to the filing of this Form 10-Q, we filed our 2019 US Federal Tax Return and included certain adjustments related to the decision of the Ninth Circuit Court of Appeals in the case of Altera Corp. v. Commissioner for which we previously recognized a reserve. As a result, our unrecognized tax benefits will decrease by $91.9 million with no impact ~~our operating results.~~

to the effective tax rate in the fourth quarter of 2020.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

Under generally accepted accounting principles in the United States, or GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. ~~As of September 30, 2017, we had recorded a total of $1.24 billion of goodwill and intangible assets.~~ An adverse change in market conditions or financial results, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such material charges may have a material ~~negative~~and adverse impact on our operating results.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, ~~2016,~~2019, we had U.S. federal net operating loss carryforwards of approximately ~~$3.47~~$2.34 billion and state net operating loss carryforwards of approximately ~~$1.41~~$1.26 billion. As of December 31, 2019, we had federal and state research and development credit carryforwards of $345.2 million and $264.8 million, respectively. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, ~~or the Code,~~ if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. In the event that ~~it is determined that~~ we have ~~in the past~~ experienced an ownership change, or if we experience one or more ownership changes ~~as a result of~~in the future, ~~transactions in our stock,~~ then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition and operating results.

Risks Related to Ownership of Our Common Stock

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:

•creating a classified board of directors whose members serve staggered three-year terms;

•authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

•limiting the liability of, and providing indemnification to, our directors and officers;

•limiting the ability of our stockholders to call and bring business before special meetings;

•requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; and

•controlling the procedures for the conduct and scheduling of ~~board of directors and~~ stockholder meetings.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.

The market price of our common stock has been and may continue to be highly volatile in response to various factors, some of which are beyond our control. Since shares of our common stock were sold in our initial public offering in November 2013 at a price of $26.00 per share, the reported high and low sales prices of our common stock has ranged from $74.73 to $13.72, through September 30, 2017. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q, factors that could cause fluctuations in the market price of our common stock include the following:

•price and volume fluctuations in the overall stock market from time to ~~time;~~

time, including fluctuations due to general economic uncertainty or negative market sentiment, in particular related to the COVID-19 pandemic;

•volatility in the market prices and trading volumes of technology stocks;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•sales of shares of our common stock by us or our stockholders;

•rumors and market speculation involving us or other companies in our industry;

•failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•the financial or non-financial metric projections we may provide to the public, any changes in those projections or our failure to meet those projections;

•announcements by us or our competitors of new products or services;

•the public’s reaction to our press releases, other public announcements and filings with the SEC;

•actual or anticipated changes in our operating results or fluctuations in our operating results;

•actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

•our issuance of shares of our common stock, whether in connection with an acquisition or upon conversion of some or all of our outstanding Convertible Notes;

•litigation or regulatory action involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

•developments or disputes concerning our intellectual property or other proprietary rights;

•announced or completed acquisitions of businesses or technologies by us or our competitors;

•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•changes in accounting standards, policies, guidelines, interpretations or principles;

•any significant change in our management; and

•general economic conditions and slow or negative growth of our markets.

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Any securities litigation can result in substantial costs and a diversion of our management’s attention and resources. We are currently subject to securities litigation and may experience more such litigation following any future periods of volatility.

The note hedge and warrant transactions may affect the value of our common stock.

~~Concurrently~~

Concurrent with the issuance of the 2021 Notes and 2024 Notes, we entered into note hedge transactions with certain financial institutions, which we refer to as the option counterparties. The note hedge transactions are generally expected to reduce the potential dilution upon any conversion of the 2021 Notes and 2024 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted with respect to the 2021 Notes or 2024 Notes, as the case may be. We also entered into warrant transactions with the option counterparties. However, the warrant transactions could separately have a dilutive effect to the extent that the market price of our common stock exceeds the applicable strike price of the warrants.

The option counterparties or their respective affiliates may modify their initial hedge positions by entering into or unwinding various derivatives contracts with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2021 Notes and 2024 Notes, as applicable (and are likely to do so during any applicable observation period related to a conversion of the 2021 Notes and 2024 Notes, as applicable, or following any repurchase of the 2021 Notes and 2024 Notes, as applicable, by us on any fundamental change repurchase date or otherwise). This activity could cause or avoid an increase or a decrease in the market price of our common stock.

In addition, if any such convertible note hedge and warrant transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

If securities or industry analysts ~~do not publish or cease publishing research or reports about us, our business or our market, or if they~~ change their recommendations regarding our common stock adversely, the price of our common stock and trading volume could decline.

The trading market for our common stock is influenced, to some extent, by the research and reports that securities or industry analysts publish about us, our business, our industry, our market or our competitors. If any of the analysts who cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analysts who cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or trading volume to decline.

~~We do not expect to declare any dividends in the foreseeable future.~~

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. In addition, our credit facility contains restrictions on payments including payments of cash dividends. Consequently, investors may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

I~~tem~~

Item 6. EXHIBITS

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

EXHIBIT INDEX

Exhibit



Incorporated by Reference
Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

10.1

Offer Letter between Twitter and Ned D. Segal, dated as of July 11, 2017

8-K

001-36164

10.1

July 11, 2017

31.1


Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.








31.2


Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.








32.1†


Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.








101.INS


XBRL Instance Document.








101.SCH


XBRL Taxonomy Schema Linkbase Document.








101.CAL


XBRL Taxonomy Calculation Linkbase Document.








101.DEF


XBRL Taxonomy Definition Linkbase Document.








101.LAB


XBRL Taxonomy Labels Linkbase Document.








101.PRE


XBRL Taxonomy Presentation Linkbase Document.

†

Exhibit
Number

Exhibit Description

Form

File No.

Incorporated by Reference
Exhibit

Filing Date

10.1

Twitter, Inc. Amended and Restated Outside Director Compensation Policy

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1†

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The ~~certifications attached as Exhibit 32.1 that accompany this~~following financial statements from the Company’s Quarterly Report on Form 10-Q ~~are deemed furnished~~for the quarter ended September 30, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and ~~not filed with the Securities~~(vi) Notes to Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and Exchange Commission and are not to be incorporated by reference into any filing of Twitter, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in ~~such filing.~~

Exhibit 101)

† The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Twitter, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing

S~~IGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

~~TWITTER, INC.~~

TWITTER, INC.

Date: ~~November 1, 2017~~

October 30, 2020

By:

/s/ Jack Dorsey

Jack Dorsey

Chief Executive Officer

(Principal Executive Officer)

Date: ~~November 1, 2017~~

October 30, 2020

By:

/s/ Ned Segal

Ned Segal

Chief Financial Officer

(Principal Financial Officer)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.000005 per share	TWTR	New York Stock Exchange



	PART I – FINANCIAL INFORMATION		Page
Item 1.		Financial Statements (Unaudited)		6
		Consolidated Balance Sheets as of Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019		6
		Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2020 and September 30, ~~2016~~2019		7
		Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three and Nine Months Ended September 30, ~~2017~~2020 and September 30, ~~2016~~2019		8
	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and September 30, 2019	9
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2020 and September 30, ~~2016~~2019		9 10
		Notes to Consolidated Financial Statements		10 11
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		25 30
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		40 43
Item 4.		Controls and Procedures		41 44
		PART II – OTHER INFORMATION
Item 1.		Legal Proceedings		42 45
Item 1A.		Risk Factors		42 45
~~Item 6.~~		~~Exhibits~~		69
Item 6.	Exhibits	66
	Signatures		71 67

	Three Months Ended						Nine Months Ended
	September 30,						September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2020		2019		2020		2019
Revenue	$	589,633		$	615,934		$	1,711,739		$	1,812,413		Revenue	$	936,233	$	823,717	$	2,427,308	$	2,451,988
Costs and expenses													Costs and expenses
Cost of revenue		210,016			225,159			643,263			626,530		Cost of revenue	361,388		281,057		933,464		823,033
Research and development		136,115			177,049			408,014			511,354		Research and development	208,877		178,553		625,071		484,041
Sales and marketing		172,957			224,436			527,847			697,226		Sales and marketing	215,285		226,204		643,858		672,252
General and administrative		63,266			67,379			203,973			200,884		General and administrative	94,576		93,758		450,181		259,173
Total costs and expenses		582,354			694,023			1,783,097			2,035,994		Total costs and expenses	880,126		779,572		2,652,574		2,238,499
Income (loss) from operations		7,279			(78,089	)		(71,358	)		(223,581	)	Income (loss) from operations	56,107		44,145		(225,266)		213,489
Interest expense		(26,732	)		(24,860	)		(78,537	)		(74,687	)	Interest expense	(39,614)		(36,226)		(112,712)		(111,803)
Interest income													Interest income	17,167		40,348		75,077		123,776
Other income (expense), net		1,922			6,640			(39,076	)		19,680		Other income (expense), net	(3,977)		(504)		(12,057)		6,583
Loss before income taxes		(17,531	)		(96,309	)		(188,971	)		(278,588	)
Provision for income taxes		3,564			6,562			10,171			11,231
Net loss	$	(21,095	)	$	(102,871	)	$	(199,142	)	$	(289,819	)
Net loss per share attributable to common stockholders:
Income (loss) before income taxes													Income (loss) before income taxes	29,683		47,763		(274,958)		232,045
Provision (benefit) for income taxes													Provision (benefit) for income taxes	1,024		11,241		1,082,784		(1,114,841)
Net income (loss)													Net income (loss)	$	28,659	$	36,522	$	(1,357,742)	$	1,346,886
Net income (loss) per share attributable to common stockholders:													Net income (loss) per share attributable to common stockholders:
Basic	$	(0.03	)	$	(0.15	)	$	(0.27	)	$	(0.42	)	Basic	$	0.04	$	0.05	$	(1.73)	$	1.75
Diluted	$	(0.03	)	$	(0.15	)	$	(0.27	)	$	(0.42	)	Diluted	$	0.04	$	0.05	$	(1.73)	$	1.72
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:													Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic		736,515			704,359			729,626			698,104		Basic	790,827		772,789		785,788		768,719
Diluted		736,515			704,359			729,626			698,104		Diluted	806,383		790,523		785,788		784,443

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net loss	$	(21,095	)	$	(102,871	)	$	(199,142	)	$	(289,819	)
Other comprehensive income (loss), net of tax:
Change in unrealized gain on investments in available-for-sale securities		564			594			404			4,075
Change in foreign currency translation adjustment		9,508			(2,400	)		32,093			(4,818	)
Net change in accumulated other comprehensive loss		10,072			(1,806	)		32,497			(743	)
Comprehensive loss	$	(11,023	)	$	(104,677	)	$	(166,645	)	$	(290,562	)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income (loss)	$	28,659	$	36,522	$	(1,357,742)	$	1,346,886
Other comprehensive income (loss), net of tax:

Change in unrealized gain (loss) on investments in available-for-sale securities	(2,154)		1,331		20,037		19,285
Change in foreign currency translation adjustment	5,067		(70,296)		(39,590)		(69,883)
Net change in accumulated other comprehensive income (loss)	2,913		(68,965)		(19,553)		(50,598)
Comprehensive income (loss)	$	31,572	$	(32,443)	$	(1,377,295)	$	1,296,288

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net loss	$	(199,142	)	$	(289,819	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		303,347			282,782
Stock-based compensation expense		331,352			477,138
Amortization of discount on convertible notes		59,644			55,590
Changes in bad debt provision		26			2,253
Deferred income taxes		(1,343	)		58
Impairment of investments in privately-held companies		62,439			2,000
Other adjustments		(1,278	)		7,374
Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions:
Accounts receivable		155,598			51,191
Prepaid expenses and other assets		4,353			2,331
Accounts payable		(14,458	)		(26,291	)
Accrued and other liabilities		(67,436	)		1,905
Net cash provided by operating activities		633,102			566,512
Cash flows from investing activities
Purchases of property and equipment		(117,800	)		(170,552	)
Purchases of marketable securities		(2,020,115	)		(2,277,727	)
Proceeds from maturities of marketable securities		2,023,778			2,033,257
Proceeds from sales of marketable securities		108,818			174,017
Proceeds from sales of long-lived assets		35,000			—
Changes in restricted cash		3,209			(6,606	)
Purchases of investments in privately-held companies		(825	)		(81,502	)
Business combinations, net of cash acquired		—			(80,142	)
Other investing activities		(10,102	)		(1,181	)
Net cash provided by (used in) investing activities		21,963			(410,436	)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards		(7,049	)		(11,098	)
Payments of capital lease obligations		(80,685	)		(73,897	)
Proceeds from exercise of stock options		7,872			7,070
Proceeds from issuances of common stock under employee stock purchase plan		14,019			15,821
Other financing activities		—			570
Net cash used in financing activities		(65,843	)		(61,534	)
Net increase in cash and cash equivalents		589,222			94,542
Foreign exchange effect on cash and cash equivalents		8,738			5,944
Cash and cash equivalents at beginning of period		988,598			911,471
Cash and cash equivalents at end of period	$	1,586,558		$	1,011,957
Supplemental disclosures of non-cash investing and financing activities
Common stock issued in connection with acquisitions	$	—		$	644
Equipment purchases under capital leases	$	100,633		$	63,022
Changes in accrued property and equipment purchases	$	(23,521	)	$	7,779


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue by services:
Advertising services	$	808,449	$	702,257	$	2,052,635	$	2,108,846
Data licensing and other	127,784		121,460		374,673		343,142
Total revenue	$	936,233	$	823,717	$	2,427,308	$	2,451,988


	September 30, 2020		December 31, 2019
Unbilled revenue	$	37,241	$	27,691
Deferred revenue	$	58,408	$	69,000


	Remaining Performance Obligations
	Total		Remainder of 2020		2021		2022 and Thereafter
Revenue expected to be recognized on remaining performance obligations	$	836,537	$	79,300	$	295,179	$	462,058

	September 30,
	2017
Due within one year	$	2,089,071
Due after one year through two years		582,467
Total	$	2,671,538


	September 30, 2020
Due within one year	$	2,753,187
Due after one year through five years	2,725,753
Total	$	5,478,940

	September 30, 2017
	Gross		Gross		Gross			Aggregated
	Amortized		Unrealized		Unrealized			Estimated
	Costs		Gains		Losses			Fair Value
U.S. government and agency securities including treasury bills	$	972,996	$	129	$	(1,611	)	$	971,514
Corporate notes, commercial paper and certificates of deposit		1,700,172		254		(402	)		1,700,024
Total available-for-sale securities classified as short-term investments	$	2,673,168	$	383	$	(2,013	)	$	2,671,538


	December 31, 2016
	Gross		Gross		Gross			Aggregated
	Amortized		Unrealized		Unrealized			Estimated
	Costs		Gains		Losses			Fair Value
U.S. government and agency securities including treasury bills	$	1,185,274	$	136	$	(1,642	)	$	1,183,768
Corporate notes, commercial paper and certificates of deposit		1,603,048		114		(949	)		1,602,213
Total available-for-sale securities classified as short-term investments	$	2,788,322	$	250	$	(2,591	)	$	2,785,981


	September 30, 2020
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregated Estimated Fair Value
U.S. government and agency securities	$	954,625	$	1,817	$	0	$	956,442
Corporate notes, commercial paper and certificates of deposit	4,491,038		31,957		(497)		4,522,498
Total available-for-sale debt securities classified as short-term investments	$	5,445,663	$	33,774	$	(497)	$	5,478,940


	December 31, 2019
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Aggregated Estimated Fair Value
U.S. government and agency securities	$	660,361	$	1,049	$	(550)	$	660,860
Corporate notes, commercial paper and certificates of deposit	4,166,203		13,133		(226)		4,179,110
Total available-for-sale debt securities classified as short-term investments	$	4,826,564	$	14,182	$	(776)	$	4,839,970


	September 30, 2017									September 30, 2020
	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Total
Assets									Assets
Cash equivalents:									Cash equivalents:
Money market funds	$	920,105	$	—	$	—	$	920,105	Money market funds	$	1,620,552	$	0	$	1,620,552
Treasury bills		29,995		—		—		29,995
Corporate notes									Corporate notes	0		9,085		9,085
Commercial paper		—		344,724		—		344,724	Commercial paper	0		324,634		324,634
Certificates of deposit		—		12,119		—		12,119	Certificates of deposit	0		12,305		12,305
Short-term investments:									Short-term investments:
U.S. government securities		—		593,594		—		593,594
Agency securities		—		377,920		—		377,920

U.S. government and agency securities									U.S. government and agency securities	0		956,442		956,442
Corporate notes		—		747,623		—		747,623	Corporate notes	0		2,928,802		2,928,802
Commercial paper		—		264,822		—		264,822	Commercial paper	0		1,099,352		1,099,352
Certificates of deposit		—		687,579		—		687,579	Certificates of deposit	0		494,344		494,344
Marketable equity securities									Marketable equity securities	1,034		0		1,034
Other current assets:									Other current assets:
Foreign currency contracts		—		2,555		—		2,555	Foreign currency contracts	0		404		404
Total	$	950,100	$	3,030,936	$	—	$	3,981,036	Total	$	1,621,586	$	5,825,368	$	7,446,954
Liabilities									Liabilities
Other current liabilities:									Other current liabilities:
Foreign currency contracts		—		1,353		—		1,353	Foreign currency contracts	$	0	$	6,889	$	6,889
Total	$	—	$	1,353	$	—	$	1,353	Total	$	0	$	6,889	$	6,889

		September 30,		December 31,
	Balance Sheet Location	2017		2016			Balance Sheet Location	September 30, 2020		December 31, 2019
Assets						Assets
Foreign currency contracts not designated as hedging instruments	Other current assets	$	2,555	$	1,955	Foreign currency contracts not designated as hedging instruments	Other current assets	$	404	$	3,756
Liabilities						Liabilities
Foreign currency contracts not designated as hedging instruments	Other current liabilities	$	1,353	$	500	Foreign currency contracts not designated as hedging instruments	Other current liabilities	$	6,889	$	1,573


	September 30, 2020		December 31, 2019
Property and equipment, net:
United States	$	1,359,952	$	999,552
International	32,768		32,229
Total property and equipment, net	$	1,392,720	$	1,031,781


	Operating Leases		Finance Leases		Total		Sublease Income
Year Ending December 31,
Remainder of 2020	$	37,771	$	2,528	$	40,299	$	(2,715)
2021	220,364		569		220,933		(8,920)
2022	218,230		0		218,230		(1,325)
2023	143,583		0		143,583		0
2024	143,242		0		143,242		0
Thereafter	630,098		0		630,098		0
Total future lease payments (receipts)	1,393,288		3,097		1,396,385		$	(12,960)
Less: leases not yet commenced	(367,190)		0		(367,190)
Less: imputed interest	(137,579)		(21)		(137,600)
Total lease liabilities	$	888,519	$	3,076	$	891,595
Reconciliation of lease liabilities as shown in the consolidated balance sheets
Operating lease liabilities, short-term	$	161,508	$	—	$	161,508
Operating lease liabilities, long-term	727,011		—		727,011
Finance lease liabilities, short-term	—		3,076		3,076
Total lease liabilities	$	888,519	$	3,076	$	891,595

Goodwill
Balance as of December 31, 2016	$	1,185,315
Foreign currency translation adjustment and other		2,565
Balance as of September 30, 2017	$	1,187,880


Goodwill
Balance as of December 31, 2019	$	1,256,699
Acquisitions	33,080
Other	(632)
Balance as of September 30, 2020	$	1,289,147

	Gross Carrying		Accumulated			Net Carrying
	Value		Amortization			Value			Gross Carrying Value		Accumulated Amortization		Net Carrying Value
September 30, 2017:
September 30, 2020:								September 30, 2020:
Patents and developed technologies	$	123,908	$	(72,293	)	$	51,615	Patents and developed technologies	$	115,203	$	(57,880)	$	57,323
Publisher and advertiser relationships		53,100		(50,155	)		2,945

Other								Other	3,233		(1,633)		1,600
Total	$	177,008	$	(122,448	)	$	54,560	Total	$	118,436	$	(59,513)	$	58,923
December 31, 2016:
December 31, 2019:								December 31, 2019:
Patents and developed technologies	$	122,611	$	(47,160	)	$	75,451	Patents and developed technologies	$	96,636	$	(41,530)	$	55,106
Publisher and advertiser relationships		53,100		(33,217	)		19,883

Total	$	175,711	$	(80,377	)	$	95,334	Total	$	96,636	$	(41,530)	$	55,106

Remainder of 2017	$	4,880
2018		16,096
2019		8,537
2020		6,263
2021		5,867
Thereafter		12,917
Total	$	54,560


Remainder of 2020	$	5,425
2021	18,249
2022	13,022
2023	7,843
2024	6,026
Thereafter	8,358
Total	$	58,923


	September 30, 2020								December 31, 2019
	2021 Notes		2024 Notes		2025 Notes		2027 Notes		2021 Notes		2024 Notes		2027 Notes
Principal amounts:
Principal	$	954,000	$	1,150,000	$	1,000,000	$	700,000	$	954,000	$	1,150,000	$	700,000
Unamortized debt discount and issuance costs (1)	(48,468)		(171,081)		(120,234)		(7,258)		(84,652)		(202,515)		(8,033)
Net carrying amount	$	905,532	$	978,919	$	879,766	$	692,742	$	869,348	$	947,485	$	691,967
Carrying amount of the equity component (2)	$	283,283	$	254,981	$	121,413	$	0	$	283,283	$	254,981	$	0

	September 30, 2017						December 31, 2016
	2019 Notes			2021 Notes			2019 Notes			2021 Notes
Principal amounts:
Principal	$	935,000		$	954,000		$	935,000		$	954,000
Unamortized initial purchasers' discount and debt discount ⁽¹⁾		(100,572	)		(183,496	)		(136,376	)		(213,657	)
Net carrying amount	$	834,428		$	770,504		$	798,624		$	740,343
Carrying amount of the equity component ⁽²⁾	$	222,826		$	283,283		$	222,826		$	283,283

	Three and Nine Months Ended
	September 30,					Three Months Ended September 30,		Nine Months Ended September 30,
	2017		2016			2020	2019	2020	2019
RSUs		32,153		54,666	RSUs	2,549	1,973	38,932	10,670
Warrants		24,329		24,329	Warrants	32,412	44,454	32,412	44,454
Stock options		5,002		8,953	Stock options	26	3	2,917	3
Shares subject to repurchase and others		6,133		8,468	Shares subject to repurchase and others	3,317	2,660	7,930	3,177

				Weighted-Average
	Number of			Grant-Date Fair
	Shares			Value Per Share
Unvested restricted common stock at December 31, 2016		5,097		$	23.04
Vested		(1,477	)	$	24.40
Canceled		(474	)	$	38.71
Unvested restricted common stock at September 30, 2017		3,146		$	20.04

	Options Outstanding
						Weighted-
				Weighted-		Average
				Average		Remaining
	Number of			Exercise		Contractual Life		Aggregate
	Shares			Price Per Share		(in years)		Intrinsic Value
Outstanding at December 31, 2016		8,723		$	7.71		4.25	$	98,240
Options exercised		(3,526	)	$	2.23
Options canceled		(195	)	$	2.74
Outstanding at September 30, 2017		5,002		$	11.75		5.00	$	48,053
Exercisable at September 30, 2017		4,062		$	9.61		4.34	$	43,239


	PRSUs Outstanding
	Shares	Weighted- Average Grant- Date Fair Value Per Share
Unvested and outstanding at December 31, 2019	646	$	31.52
Granted (100% target level)	729	$	27.77

Vested (100% target level)	(646)	$	31.52
Unvested and outstanding at September 30, 2020	729	$	27.77


	TSR RSUs Outstanding
	Shares	Weighted- Average Grant- Date Fair Value Per Share
Unvested and outstanding at December 31, 2019	759	$	41.15
Granted (100% target level)	487	$	31.16
Additional earned performance shares related to 2019 grants	52	$	54.97
Vested (116% target level)	(381)	$	54.97
Unvested and outstanding at September 30, 2020	917	$	30.90

	RSUs Outstanding
				Weighted-			RSUs Outstanding
				Average Grant-			Shares	Weighted- Average Grant- Date Fair Value Per Share
				Date Fair Value
	Shares			Per Share
Unvested and outstanding at December 31, 2016		48,069		$	22.64
Unvested and outstanding at December 31, 2019						Unvested and outstanding at December 31, 2019	31,731	$	29.74
Granted		11,176		$	15.51	Granted	20,923	$	29.99
Vested		(16,444	)	$	22.25	Vested	(11,229)	$	26.94
Canceled		(10,648	)	$	22.26	Canceled	(2,493)	$	30.52
Unvested and outstanding at September 30, 2017		32,153		$	20.49
Unvested and outstanding at September 30, 2020						Unvested and outstanding at September 30, 2020	38,932	$	30.63

	2016 Employee			2016
	Termination Plan			Lease Plan
Charges	$	21,611		$	79,685
Cash payment		(11,629	)		(3,562	)
Non-cash and other adjustments		(6,357	)		(19,577	)
Accrued as of December 31, 2016	$	3,625		$	56,546
Charges ⁽¹⁾	$	772		$	2,824
Cash payment		(4,225	)		(20,369	)
Non-cash and other adjustments		76			(3	)
Accrued as of September 30, 2017	$	248		$	38,998

Reflected in consolidated balance sheets as of September 30, 2017:
Accrued and other current liabilities	$	248		$	35,697
Other long-term liabilities	$	—		$	3,301

	Three Months Ended December 31, 2016								Three Months Ended March 31, 2017									Three Months Ended June 30, 2017
	United States		International			Worldwide			United States			International			Worldwide			United States		International			Worldwide
												(in millions)
Previously Reported MAU		67		252			319			70			259			328			68		260			328
Adjustment ⁽¹⁾		—		(1	)		(1	)		(1	)		(1	)		(2	)		—		(2	)		(2	)
Adjusted MAU		67		251			318			69			257			327			68		258			326

⁽¹⁾ The difference between Adjusted MAU and Previously Reported MAU does not correspond to the amount of the Adjustment due to rounding.