Twitter exceeds analysts’ expectations: Twitter have reported their second profitable quarter in a row. This seems to have alleviated the doubts of the marketplace, providing more evidence that their wider strategy of focusing on growing the active user base, increased engagement with ads and the sale of data is beginning to pay off.
Concerns Shrugged Off
There’s been concern over the leadership of CEO Jack Dorsey, the embattled founder, who appears to have been struggling to balance responsibilities between Twitter and the payment processing platform he co-founded, Square.
Q1 earnings of $664.9m outperformed Thomson Reuters’ expectations by more than $50m. That represents a 21% year on year revenue growth. One of the key statistics the marketplace was looking out for was user uptake. In the ‘information age‘, more users means more attention, and more advertising revenue. Twitter bagged more than six million extra users a month, which represents a valuable opportunity for advertisers. Indeed, ad revenue was up more than 21% to $575m, indicating a higher rate of user engagement (despite the falling cost per engagement).
Shares Up 5.3% Following Report
This represents a remarkable turnaround for a tech stock many analysts had written off as overvalued. This time last year, investors were looking at a company reporting a $61.6m dollar loss. Now, Q1 profit has been reported at $61m, exceeding Twitter’s goal of “driving toward profitability” that they set in 2017. With all the indicators pointing in the right direction, Twitter have boosted their own projected earnings before interest, tax, depreciation and amortisation, to between $245m and $265m. Analysts expect a figure of only $217m. Will Twitter exceed expectations yet again?
One potential dampener to the mood was a cause for concern raised by Mr. Dorsey himself: the use of the platform for hate speech, the abundance of trolling and the large number of bots. This kind of malicious activity might not be so rampant much longer though. Twitter is looking to hire subject matter experts in the field. While this is certainly a step in the right direction, the efficacy of any new hires will have to remain to be seen.