Twitter tops projections, but growth likely to slow
Twitter beat analysts’ estimates for earnings in the first quarter and showed signs that it’s finally overcoming a slump, but the nascent turnaround was tempered by an outlook for slower growth this year.
The social media company’s push into live video and more personalized content appears to be starting to pay off, boosting revenue and profit in the first quarter by luring users and advertisers. Sales jumped 21 percent, the most in two years, to $664.9 million, the company reported. Twitter, originally known for its 140-character posts, said monthly active users rose to 336 million, up by 6 million from the prior period and slightly ahead of analysts’ predictions.
Still, the company said in a letter to shareholders Wednesday that it will be tough to match last year’s growth rates in the second half of this year, and as a result the pace of revenue gains will more resemble those of 2016.
The shares were whipsawed, initially rising as much as 14 percent in early trading when the results were first posted, then gradually slipping after the remarks on an analyst call regarding the growth outlook. The stock fell as much 7.7 percent and was trading down 3.9 percent, to $29.29, at 10:28 a.m. in New York, along with a broader decline in benchmark indexes.
“Twitter is still in rebuilding credibility mode with investors and advertisers, so it’s important they keep demonstrating momentum relative to expectations,” said Richard Greenfield, an analyst at BTIG. “They are continuing to position themselves so expectations don’t get out of control.”
Heading into the earnings, those expectations were already running high. An increasing number of analysts started seeing the company stabilizing after a rocky few years, when it struggled to compete for ad dollars with the likes of Facebook and Google’s YouTube. Since Twitter reported a third-quarter earnings beat in October, its shares have rallied and been upgraded by at least eight analysts.
But rough patches remain. Monthly user growth was up only 2.8 percent from a year ago, the slowest pace in two years. That contrasts with Facebook, which has six times more users than Twitter and increased its monthly users by 14 percent in the fourth quarter.
And more of Twitter’s growth is now coming from international markets as the U.S. gets saturated. Monthly active users in the U.S. increased by 1 million from the fourth quarter to 69 million. Internationally, MAUs grew to 267 million users from 262 million. Revenue in the U.S. increased 2 percent year-overyear, while international revenue jumped 53 percent.
Chief Executive Officer Jack Dorsey, who also runs mobile payments platform 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 increased 10 percent in the recent period, marking the sixth consecutive quarter of double-digit increases.