Twitter rallies as user count and sales impress Wall Street
Twitter Inc. topped first-quarter sales projections and reported strong user growth, bolstered by changes to its social-media service that are drawing a wider audience of consumers and advertisers. The shares rallied.
The San Francisco-based company reported $787 million in revenue, an 18 percent increase from the year-earlier period. Analysts, on average, estimated $775 million, according to data compiled by Bloomberg. The micro-blogging site also posted an increase in monetizable daily active users to 134 million, beating analyst predictions for about 128.4 million. That compares with 126 million in the fourth quarter.
Twitter shifted focus to daily users for the first time in the December quarter, arguing that it’s a more meaningful metric than monthly visitors because the company aims to drive people to the service every day. Chief Executive Officer Jack Dorsey has been escalating efforts to rid the site of toxic content amid heightened concerns that social media companies have failed to curb the exploitation of personal data, election meddling and hateful posts. Having long been criticized for relying on users to report abuse, the company recently said some 38 percent of abusive content is now being found through technology and flagged for human review, up from none last year.
Rich Greenfield, an analyst at BTIG, said the increase in monetizable daily active users was the largest in the past four years, “clearly illustrating that the product improvements and health initiatives are resonating with consumers all over the world.”
Twitter rose as much as 10 percent to $37.99 in pre-market trading in New York.
Monthly active users were 330 million in the first quarter, Twitter said. That was up from 321 million in the previous quarter, but marked a decline from the 336 million in the year-earlier period. That number has been decreasing year over year for several quarters, and Twitter told investors in 2018 that the metric would likely continue to drop for some time as it removes spam and suspicious accounts. Twitter said this is the last time that it will disclose monthly active users.
Still, Twitter is ending reporting of that metric “on a high note,” with monthly active users rising quarter over quarter for the first time since at least early 2018, noted Jasmine Enberg, an analyst at EMarketer. Twitter’s shift to monetizable daily active users is “in keeping with its value proposition to advertisers—a committed though not very large user base when compared with other social platforms,” she said.
While Twitter was able to attract more people to its site, one prolific tweeter found reason to grouse. U.S. President Donald Trump called on Congress to “get involved” regarding Twitter’s “discriminatory” practices against Republicans. The president, who has 60 million followers, said he would have even more if “Twitter wasn’t playing their political games.”
The president has repeatedly voiced his displeasure with Twitter’s efforts to remove tens of millions of suspicious accounts as part of an effort to help combat manipulative and abusive content by deleting fake profiles. Dorsey told lawmakers in September that the company wasn’t biased and that there were technical explanations for each example that Republicans had raised to press their case of political bias.
The company said it expects second-quarter revenue to be $770 million to $830 million—a wide forecast range with a midpoint of $800 million, lower than analysts’ average sales estimate of $819.2 million.
Twitter, which has a history of being slow to make changes to its service, has recently increased the pace of new product introductions. Last month it opened access to its prototype app, called twttr, to test new ideas and get feedback. The company is also rolling out a Snapchat-like camera feature that lets users post videos or photos in a swipe. The prototype app and iterations are part of the company’s efforts to make Twitter easier to use and feel more like a chat service, with fluid conversations.
Twitter’s stock is up 20 percent so far this year, outperforming the broader market but lagging behind social media peers. Facebook has climbed more than 38 percent in 2019, while Snap Inc. has more than doubled.
Net income in the first quarter rose to $190.8 million, or 25 cents a share, from $61 million, or 8 cents, a year earlier. Profit excluding certain items was 37 cents a share, compared with the average analyst estimate of 15 cents. In last year’s first quarter, revenue was $665 million.