Twitter earns first profit, stock soars

twitter
Twitter's stock price soared .

By Ang Gao
Medill Reports

Twitter Inc. earned a profit for the first time in the fourth quarter of 2017. The stock soared.

The San Francisco-based company reported net income of $91.1 million, or diluted earnings per share of 12 cents, up from a net loss of $167.1 million or diluted earnings per share of 23 cents in the same quarter of 2016. The quarterly results well exceeded the Wall Street estimate compiled by Bloomberg of $14.6 million net income and 2 cents diluted earnings per share.

Twitter earned a profit for the first time in the fourth quarter of 2017.

Twitter’s revenues grew to $731.6 million in the fourth quarter, an increase of 2 percent, beating the estimate of $686.4 million compiled by Bloomberg.

Twitter’s sales and profitability in the fourth quarter of 2017 were “a pleasant surprise,” said Michael Pachter, a research analyst at Wedbush Securities, in an email.

The company’s owned-and-operated advertising revenue was $593 million in the quarter, a year-over-year increase of 7 percent. This accounted for 92 percent of total advertising revenue of $644 million.

“Q4 was a strong finish to the year,” said Jack Dorsey, Twitter’s CEO, in an earnings conference call. “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double-digit DAU [daily activated users] growth. I’m proud of the steady progress we made in 2017, and confident in our path ahead.”

The fourth quarter of 2017 was the fifth consecutive quarter of double-digit DAU growth, and audience and engagement continue to grow, according to the company’s press release. Twitter launched new features to thread multiple tweets together and to expand the character limit to 280 from 140, which provides more space for people to express their opinions.

Twitter didn’t grow MAU, or monthly activated users, but highlighted its “information quality” initiative to weed out dormant accounts, bots and fake accounts, which likely had some negative impacts on MAU growth, Pachter said in an email.

“I wouldn’t say their results were ‘strong’ in the context of Facebook’s $2.6 billion sequential growth and Google’s $4.5 billion of sequential growth,” Pachter wrote. “They are barely profitable and lost money for the full year.”

In 2017 Twitter’s net loss narrowed to $108.1 million, or 15 cents per diluted share, compared with a net loss of $456.9 million, or 65 cents per diluted share, in 2016. Annual revenue slipped to $2.44 billion in 2017, down 2.0 percent from $2.53 billion in 2016.

Twitter predicted an adjusted EBITA of between $185 million and $205 million for the first quarter of 2018, implying revenues in a range from $544 million to $621 million, according to Pachter’s report published by Wedbush Securities.

The company’s shares closed at $30.18 on Thursday, increasing $3.27, or 12.2 percent.

Photo at top: Twitter’s stock price soared by 12 percent on Thursday. (Ang Gao/MEDILL)