Twitter beats forecasts with first-quarter revenues as user numbers surge

Net income rose to $190.8m from $61m a year earlier

FILE - In this Feb. 8, 2018, file photo, the logo for Twitter is displayed above a trading post on the floor of the New York Stock Exchange. Twitter reports financial results Tuesday, April 23, 2019. (AP Photo/Richard Drew, File)

Twitter on Tuesday posted better than expected first-quarter revenue and a surprise rise in the number of monthly active users, a sign that the social media platform may be on a sustainable path after a year of stagnant user growth, according to Reuters.

It also topped first-quarter sales projections, bolstered by changes to its social-media service that are drawing a wider audience of consumers and advertisers.

Net income in the first quarter rose to $190.8m, or 25 cents a share, from $61m, 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 $665m.

The San Francisco-based company reported $787 million in revenue, an 18 per cent increase from the year-earlier period. Analysts, on average, estimated $775m, according to data compiled by Bloomberg. The microblogging site also posted an increase in monetiseable 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.

Analysts were encouraged by signs Twitter had turned a corner in terms of monthly user growth and better appealing to advertisers, but said that the new user metric could make comparisons between Twitter and social media rivals more difficult.

"It looks like Twitter is on path to sustainable revenue growth and accelerated profit expansion, driven by improvements to the user experience and tools enabling direct response and search advertising," said analyst Michael Pachter at Wedbush Securities.

"But people are not impressed with a made up metric and their reluctance to give us actual users. I don’t think the stock can get out of its own way until they come clean and report the same metrics everyone else does."

Chief executive 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 criticised for relying on users to report abuse, the company recently said some 38 per cent of abusive content is now being found through technology and flagged for human review, up from none last year.

"We are now removing 2.5x more Tweets that share personal information and 38 percent of abusive Tweets that are taken down every week are being proactively detected by machine learning models," Mr Dorsey said.

“We are taking a more proactive approach to reducing abuse and its effects on Twitter,” he said. “We are reducing the burden on victims and, where possible, taking action before abuse is reported."

Advertisers have welcomed those moves, but the company still faces a broader backlash against social media.

US President Donald Trump, a frequent tweeter with one of the most-followed accounts, said he has faced discrimination as a Republican from Twitter, without presenting evidence.

"They don’t treat me well as a Republican. Very discriminatory, hard for people to sign on. Constantly taking people off list. Big complaints from many people," he tweeted, adding a second later calling for the creation of "more, and fairer" social media companies in response to discrimination.

"We enforce the Twitter Rules dispassionately and equally for all users, regardless of their background or political affiliation," a Twitter representative said. "We are constantly working to improve our systems and will continue to be transparent in our efforts."

Twitter rose as much as 10 per cent to $37.99 in premarket 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.

The company said it expects second-quarter revenue to be $770m to $830m - a wide forecast range with a midpoint of $800m, lower than analysts’ average sales estimate of $819.2m.

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 per cent so far this year, outperforming the broader market but lagging behind social media peers. Facebook has climbed more than 38 per cent in 2019, while Snap has more than doubled.

"The nervousness is that a lot of social media companies are facing regulatory pressure and investors don’t quite know how to think about how that might translate into the longer-term," said James Cordwell, an analyst at Atlantic Equities.

"Investors are very cognizant of the investments we’ve seen at Facebook to try and get ahead of its regulatory issues, and I think people are not quite sure what that means for Twitter."