TWITTER FLIES BEYOND FORECAST
Shares soar after strong earnings report; company also saw growth in monthly active users, but revealed it miscalculated numbers in the past
“Product improvements continue to drive audience and engagement growth. Our work to increase relevance and make Twitter easier is making an impact.” — Twitter co-founder and CEO Jack Dorsey
Twitter’s shares surged Thursday after it reported third-quarter earnings and revenue that beat Wall Street’s expectations, providing a glimmer of hope for the struggling tech firm.
The company also grew its monthly active users, but revealed it had previously overstated those figures since 2014.
Twitter’s stock closed up 18.5 percent at $20.31 per share.
The San Francisco-based social media company continues to face an uphill battle even after Twitter cofounder Jack Dorsey returned as its CEO in 2015. It’s struggled with attracting more users and ad dollars.
Despite some positive signs on Thursday, some analysts— pointing to Twitter’s drop in revenue and competition from larger so--
cial media firms — say the company still has a long way to go.
“Twitter is not a growth company and there’s a big question if it ever will become one again,” said Scott Kessler, an analyst at CFRA Research.
Some of the tech firm’s user numbers also have missing elements, he noted. Twitter said the number of users who log onto the site daily grew by 14 percent in the third quarter compared to the same period last year, but it doesn’t disclose the total.
Twitter’s monthly active users reached 330 million in the third quarter, an increase of 4 percent compared to the same period last year.
“Product improvements continue to drive audience and engagement growth. Our work to increase relevance and make Twitter easier is making an impact,” Dorsey said during a conference call.
But Twitter also lowered the number of monthly active users by 1 million to 2 million for the past three quarters after discovering it was mistakenly counting users of certain third-party apps. The tech firm said it doesn’t have data before the fourth quarter of 2016.
Twitter grew its monthly active users by 4 million fromthe second to the third quarter. But the adjusted numbers also showed that the company saw a drop in users from the first to the second quarter.
From July to September, the tech firm raked in $590 million, beating the $587.48 million that analysts surveyed by Bloomberg expected. Revenue in the third quarter dropped 4 percent compared to the same period last year.
Twitter posted a loss of 3 cents per share in the third quarter, which was slightly better than the loss of 11 cents per share that analysts projected. The company, which has been cutting ex- penses, saw its net loss drop to $21 million, 79 percent lower than in the same period last year. It said it expects to become profitable in the fourth quarter.
Excluding certain onetime expenses, Twitter earned 10 cents per share in the third quarter, above expectations of 7 cents per share.
Brian Wieser, an analyst with Pivotal Research, said that many advertisers experimented with Twitter for years, but the platform wasn’t always the right fit for their campaigns.
As some marketers move away from Twitter, others are seeing the value of advertising on the site.
“Advertisers who know it and like it are increasing their spending on the platform,” he said. “You can get comfortable with the idea that there likely will be growth again in the future as opposed to a permanent decline.”
But ad dollars aren’t the only thing Twitter has to worry about.
The tech firm has been facing criticism for not doing enough to combat online abuse or protect the integrity of U.S. elections.
Lawmakers want social media firms, including Twitter, to dig deeper into how Russia might have used their tools and ads to influence the 2016 U.S. presidential election.
Twitter said Thursday it was barring Russia Today and Sputnik from advertising on its site. Russia Today denied trying to meddle in the election or violating Twitter’s advertising rules.
Meanwhile, Twitter is trying to make the site easier to use.
The company has been testing 280-character tweets in certain countries, including the United States.
Dorsey said it’s too early to tell how this change will impact user engagement and growth.
“We want to make sure that we’re enabling more voices to speak and not be frustrated by the constraints so they can actually get their thoughts out in real time,” he said.