Twitter heads skyward as it reports first profit
Twitter soared the most since its market debut in 2013 after it posted the first growth in four quarters, driven by improvements to its app and added video content that are persuading advertisers to boost spending on the social network.
The company topped analysts’ average sales estimates in the fourth quarter and for the first time reported a real profit, a milestone in Chief Executive Officer Jack Dorsey’s turnaround effort. Monthly active users were little changed from the prior quarter at 330 million, a lower-than-projected total that the company attributed in part to stepped-up efforts to reduce spam, malicious activity and fake accounts.
The report adds to positive momentum in recent months for Twitter, which spent the second half of 2017 explaining how Russian-linked accounts — including automated bots — influenced content on its platform around the 2016 U.S. presidential election.
Dorsey, who also runs Square Inc., has been working to broaden Twitter from a microblogging site into a destination for users to see “what’s happening now” by striking live-streaming partnerships with news outlets and sports leagues.
After aggressively slashing spending over the past few years, Twitter will invest in products this year that increase audience engagement, which will cause expenses to “more closely align with revenues,” Chief Financial Officer Ned Segal said during a conference call.
The shares soared as much as 30 percent, the most since Nov. 7, 2013, to $35 in New York trading. That brings gains over the past 12 months to 77 percent. Shares closed at $30.19, up $3.28, or 12.2 percent.
Twitter’s focus on video, as well as a new software algorithm that shows users the most relevant postings first, have led people to spend more time on the platform, said Richard Greenfield, an analyst at BTIG.
“I think they’ve come a long way,” Greenfield said. “The product has dramatically improved. They’re doing a better job of showing the right tweets to the right people at the right time.” Greenfield added that “consumer or user happiness is making advertisers want to be there.”
Twitter will be doing more experimentation to make its timeline more “personalized and relevant” to people, Dorsey said. He also emphasized a focus on matching people with their interests as fast as possible. There will be “a much more cohesive strategy” around events, like seeing sports scores during live games, Dorsey said.
New product tweaks, like Twitter’s decision to increase the character limit to 280, have increased engagement and minimized confusion, he said.
Revenue in the recent period rose 2 percent from a year earlier to $731.6 million, buoyed by data-licensing sales and video advertising. Analysts on average had predicted $686.4 million, according to Bloomberg. Net income was $91.1 million, or 12 cents a share, marking the first time the company reached profitability under generally accepted accounting principles. That compared with a loss of $167.1 million, or 23 cents, a year earlier.