Twitter Swings To Profit in Q3, Revenue up 30% y-o-y

Twitter Swings To Profit in Q3, Revenue up 30% y-o-y
October 26, 2018


The micro-blogging site Twitter Inc. (TWTR) reported a swing to profit in the Q3 on robust revenue growth yesterday. Both revenue and adjusted earnings per share for Q3 2018 exceeded analysts’ estimates. The company’s shares closed at $31.80 up 15.47% or $4.26 from the prior close.


Twitter makes an amazing turnaround, but concerns remain

The San Francisco-based company reported third-quarter revenues of $758.11 million, an increase of 29% from $589.63 million last year and above analysts’ estimate of $702.57 million. The reported revenue excluded the roughly $7 million realized in the year-ago quarter from Twitter’s fully-depreciated TellApart product.

  • Advertising revenue increased 29% from prior year to $650 million. Specifically, Total ad engagements rose 50% on y-o-y
  • Cost per engagement (CPE) declined 14% y-o-y.
  • Data licensing and other revenue totaled $108 million, up 25% year-over-year.
  • US revenue grew 28% y-o-y to $423 million.
  • International revenue totaled $335 million, an increase of 30% on a y-o-y

For the third quarter, net income was $789.18 million or $1.02 per share, compared to a net loss of $21.10 million or $0.03 per share in the corresponding period last year. The record profit reported by Twitter included one-time gains from tax and asset valuation adjustments.

On an adjusted basis, Q3 earnings were $162.72 million or $0.21 per share. The reported adjusted earnings were more than double than $77.85 million or $0.10 per share posted last year. On average, 34 analysts surveyed by Thomson Reuters anticipated earnings of $0.14 per share for the recent quarter.

Average monthly active users stood at 326 million, a decline from 335 million in the prior quarter. The company revealed that it had 67 million monthly active users in the US in the quarter ended September 30, and 259 million worldwide. The company said the decline was an outcome of efforts to remove fake, abusive and inauthentic accounts. Notably, for the second successive quarter in a row, Twitter missed monthly active user estimates.

Commenting on the results, Ned Segal, Twitter’s CFO said: “Our third quarter results reflect our success with advertisers, delivering revenue growth of 29 percent and better than expected growth across most products and geographies. We are demonstrating Twitter’s unique value proposition for advertisers through innovative ad formats, better relevance and continued improvement in ROI.”

Twitter’s average daily active usage (DAU) for the quarter increased 9% year-over-year, compared to 14% in the same quarter last year. Twitter does not provide specific numbers. Looking forward, Twitter projects adjusted EBITDA in the range of $320 million to $340 million for the fourth quarter.

Commenting on the results, CEO Jack Dorsey said: “We’re achieving meaningful progress in our efforts to make Twitter a healthier and valuable everyday service.”

Dorsey further said: “We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up… This quarter’s strong results prove we can prioritize the long-term health of Twitter while growing the number of people who participate in public conversation.”

After years of losses, Twitter has succeeded to swing to profit in the last few quarters, but it has struggled to increase its user base. To draw more users, recently, the social media network started offering live video service.

Despite offering unique near real-time information, Twitter lags behind its peers such as Facebook and Instagram. Still, analysts expect Twitter to gain 1.8% share of global display ad revenue in 2018.

However, the markets did not mind a small dip in the number of users of the short-messaging service. Therefore, we can expect the rally to continue in the short-term.

Technically, the stock has broken above its 50-day moving average. The stochastic indicator is rising out of the bearish zone. As a result, we can expect the stock to move up in the short-term.

twt - technical analysis - 26th October 2018

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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