Twitter notches strong quarter
SAN FRANCISCO » Growth in ad sales and monthly users spurred a secondstraight profitable quarter for Twitter as the social media company on Wednesday reported firstquarter sales that exceeded Wall Street’s expectations.
However, reaction to the largely positive quarterly results turned south as investors took a dim view of Twitter’s forecast for the second half of the year.
Twitter, which released its results before the stock market opened Wednesday, said it ended the first three months of 2018 with 336 million monthly active users, an increase of 6 million such users over the fourth quarter of 2017. Five million of those new users came from international markets, while Twitter added 1 million new users in its U.S. home base.
Wall Street analysts had expected Twitter to finish its first quarter with 334 million monthly active users. “This quarter was another major step in the right direction,” said Dan Ives, head of technology research at GBH Insights. “That shows the monetization and ad-growth machine at Twitter is finally heading in the right direction after years of a ‘one step forward two steps back’ strategy.”
Revenue from advertising continued to improve for Twitter, rising 21 percent from a year ago, to $575 million. Twitter said ad revenue was almost evenly split between its U.S. and international markets, with $288 million in ad sales coming from the U.S. and $287 million from other regions.
“We saw growth across all regions with particular strength in the Asia-Pacific region,” Twitter said, in a letter to its shareholders about its quarterly results. “Video now accounts for more than half of our ad revenue, and was our fastest growing ad format (in the first quarter).”
The company has been working on more methods to keep visitors on the site for longer than it takes to post a tweet. Live programs, including sports and information shows, have helped Twitter in its efforts to sell more video ads, which are fueling the company’s revenue gains.
Twitter said it ended the quarter with a profit of $61 million, or 8 cents
a share, on revenue of $664.9 million.
Excluding one-time items, Twitter said it earned 16 cents a share. That topped the estimates of analysts who had forecast the company would earn 12 cents a share on $606.9 million in total sales.
The results helped Twitter’s shares rise almost 3 percent in pre-market trading, but those gains evaporated after the regular trading session began and investors assessed Twitter’s outlook.
Twitter’s stock price
“Putting all of this together, we can see that the underlying health of the business isn’t much different than we thought it was going into the quarter.”
— Brian Wieser, Pivotal Research
ended the day down by 2.4 percent, at $29.75, as investors turned their attention toward comments the company made about its outlook in its quarterly shareholder letter Wednesday.
The company said it remains “optimistic about our ability to execute on our priorities and deliver value for advertisers on our platform,” but added that investors shouldn’t get too far ahead of themselves when it comes to setting expectations for Twitter’s upcoming earnings
and revenue figures.
“We face increasingly difficult comparables in the second half of 2018 as we approach the anniversary of the broad-based recovery that began in the second half of 2017,” Twitter said. The company didn’t give any of its own estimates for earnings or sales for the rest of the year.
Brian Wieser, of Pivotal Research, maintained his sell rating and $20-ashare price on Twitter’s stock. Wieser wasn’t particularly enthused about Twitter’s results or what it may report down the road, calling the company “a durable, if nichey (but highly differentiated), platform for digital advertising.”
“Putting all of this together, we can see that the underlying health of the business isn’t much different than we thought it was going into the quarter,” Wieser said. “The skewed nature of the quarter’s results should temper how investors will react to them.”