Twitter tops 1Q earnings projections

The numbers validate a growing view among analysts that the company has stabilised after a rocky few years

by BLOOMBERG

SAN FRANCISCO • Twitter Inc’s push into live video and more personalised content is finally starting to pay off, boosting revenue and profit more than projected in the first quarter (1Q) by luring users and advertisers. The shares rose.

Sales jumped 21%, the most in two years, to US$664.9 million (RM2.66 billion), Twitter said yesterday in a statement. That surpassed the average analysts’ estimate of US$605.9 million, according to data compiled by Bloomberg. The social-media network, originally known for its 140-character posts, said monthly active users rose to 336 million, up by six million from the prior period and slightly ahead of analysts’ predictions.

The numbers validate a growing view among analysts that the company has stabilised after a rocky few years, when it struggled to compete for ad dollars with the likes of Facebook Inc and Google’s YouTube. Since Twitter reported a 3Q earnings beat in October, its shares have rallied more than 50% and been upgraded by at least eight analysts. The strong revenue and user growth also indicates that escalating concerns about social-media companies’ data-collection practices so far haven’t eroded Twitter’s business. 

“There’s just been a continued global interest in news and information that’s a good tailwind for Twitter, especially as their products improve,” said Richard Greenfield, an analyst at BTIG, before the results. “They’re iterating the product more in the last two years than they have in the past seven.”

The stock jumped 14% before giving up some of those gains in early trading. The shares were up 4% to US$31.76 at 7:33am premarket in New York yesterday.

CEO Jack Dorsey, who also runs Square Inc, has focused on making Twitter more useful, including streaming programming such as National Football League highlights and recaps of series like “Game of Thrones”. The company is applying artificial intelligence to put the most relevant tweets at the top of people’s feeds, and has added features that curate tweets, photos and videos around events. Twitter said daily active users (DAUs) increased 10% in the recent period, marking the sixth consecutive quarter of double-digit increases. The company doesn’t give a total number for DAUs.

More of Twitter’s growth is coming from international markets as the US gets saturated. Monthly active users (MAUs) in the US increased by one million from the 4Q to 69 million. Internationally, MAUs grew to 267 million users from 262 million. Revenue in the US increased 2% year-over-year, while international revenue jumped 53%.

Dorsey has been honing the platform into a place to see “what’s happening now”, and positioning the site as the place to find out about live events from news to concerts.

Awareness of Twitter’s brand has also gotten a boost from frequent tweets by public figures like US President Donald Trump, who is among the platform’s most high-profile users. Global events like the Olympic games and government elections also help to drive user growth.

And as Twitter has worked to root out terrorist content and abusive trolls, advertisers’ perceptions of the platform are also improving, according to a survey conducted by RBC Capital Markets and Ad Age.

“Twitter’s video ad product continues to perform well as advertisers continue to look for higher quality online video impressions,” wrote Morgan Stanley analyst Brian Nowak, a long-time Twitter bear who upgraded the stock to equalweight last week, citing improved personalisation that’s keeping users on Twitter for longer.

Marking its 2Q of profit under generally accepted accounting principles, Twitter posted net income of US$61 million, or eight cents a share, in the 1Q. That compared to analyst projections for a net loss of two cents on average. Profit excluding some costs was 16 cents a share, exceeding estimates for 12 cents.

The company gave a 2Q outlook for adjusted earnings before interest, taxes, depreciation and amortisation of US$245 million to US$265 million. Analysts estimated US$218 million. — Bloomberg