Twitter Is Approaching Profitability for the First Time After Exceeding Q3 Expectations

The site gained 4 million users, but overall ad revenue is down

Twitter's stock surpassed the $19 mark for the first time since July.
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Twitter’s third-quarter earnings, which beat analysts’ expectations both in terms of total user growth and earnings per share, signal good news for investors: If the company hits its fourth-quarter guidance, it could be profitable for the first time.

Investors reacted positively to Twitter’s third-quarter earnings as shares are trading higher this morning after the results were released, crossing the $19 mark for the first time since July, when shares traded around $20.

“This quarter we made progress in three key areas of our business: we grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability,” Twitter CEO Jack Dorsey said in a statement.

Twitter gained another 4 million users in the third quarter, bringing the platform’s total to 330 million.

According to its third-quarter earnings results released today, the company said total advertising revenue declined 8 percent to $503 million, with U.S. revenue falling 11 percent to $332 million and international revenue increasing 6 percent to $258 million.

Total revenue for the past three months fell to $590 million, a four-percent decrease from third-quarter 2016, with data licensing and other revenue increasing 22 percent to $87 million.

 

Total ad engagements grew 99 percent year over year, with cost-per-engagement falling 54 percent. Meanwhile, daily active usage of the platform grew 14 percent. (On an earnings call with investors, Twitter COO Anthony Noto said 2 million new users visit Twitter every day, with some of those coming for the first time ever and others visiting for the first time in 30 days.)

While Twitter reported a growing user base, it also revealed that it had overstated monthly average users for the past three quarters, which the company attributed to how MAUs were counted through a third-party application called Digits. According to Twitter, Digits sent authentication messages via SMS that did not turn into activity on the platform. For example, in the fourth quarter of 2016, Twitter overstated total MAUs by 1 million. In first and second quarters of 2017, it adjusted total MAUs down by 2 million.

“Historical growth rates and absolute numbers really don’t change much,” Dorsey said on the earnings call when asked about the adjustments.

Live video, a key area of focus for the platform, also grew, with Twitter streaming more than 830 live events through various partners, driving global audience viewership up 74 million. In a letter to shareholders, Twitter said it landed 30 new live video partnerships, 10 of which were international. (It also pointed out that all 16 of the livestreaming partnerships announced during its Digital Content NewFronts event have now been funded.)

“Providing people with a broad selection of compelling, rich content also remains a core part of our strategy to drive conversation, connection, and engagement on Twitter,” according to the shareholder letter. “It’s been one year since we launched livestreaming premium content, and it has significant momentum.”

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