(Bloomberg)—Twitter Inc.’s push into live video and more personalized content is finally starting to pay off, boosting revenue and profit more than projected in the first quarter by luring users and advertisers.
Sales jumped 21%, the most in two years, to $664.9 million, Twitter said Wednesday in a statement. That surpassed the average analysts’ estimate of $605.9 million, according to data compiled by Bloomberg. The social-media network, originally known for its 140-character posts, said monthly active users rose to 336 million, up by 6 million from the prior period and slightly ahead of analysts’ predictions.
The numbers validate a growing view among analysts that the company has stabilized after a rocky few years, when it struggled to compete for ad dollars with the likes of Facebook Inc. and Google’s YouTube. Since Twitter reported a third-quarter earnings beat in October, its shares have rallied more than 50% and been upgraded by at least eight analysts.
The strong revenue and user growth also indicates that escalating concerns about social-media companies’ data-collection practices so far haven’t eroded Twitter’s business.
But for all the good news, Twitter still has some rough patches. The company cautioned that its rate of revenue growth will slow back down to its 2016 pace. And monthly user growth was up only 2.8% from a year ago, the slowest pace in two years. That contrasts with Facebook, which has six-times more users than Twitter and increased its monthly users by 14% in the fourth quarter. Facebook reports earnings Wednesday afternoon.
“Twitter is still in rebuilding credibility mode with investors and advertisers, so it’s important they keep demonstrating momentum relative to expectations,” said Richard Greenfield, an analyst at BTIG. “They are continuing to position themselves so expectations don’t get out of control.”
The stock jumped 14% before giving up much of those gains in early trading. The shares were up 3% to $31.46 at 8:42 a.m. premarket in New York.
CEO Jack Dorsey, who also runs Square Inc., has focused on making Twitter more useful, including streaming programming such as National Football League highlights and recaps of series like “Game of Thrones.” The company is applying artificial intelligence to put the most relevant tweets at the top of people’s feeds and has added features that curate tweets, photos and videos around events. Twitter said daily active users increased 10% in the recent period, marking the sixth consecutive quarter of double-digit increases. The company doesn’t give a total number for DAUs.
More of Twitter’s growth is now coming from international markets as the U.S. gets saturated. Monthly active users in the U.S. increased by 1 million from the fourth quarter to 69 million. Internationally, MAUs grew to 267 million users from 262 million. Revenue in the U.S. increased 2% year over year, while international revenue jumped 53%.
Dorsey has been honing the platform into a place to see “what’s happening now,” and positioning the site as the place to find out about live events from news to concerts.
Twitter is still in rebuilding credibility mode with investors and advertisers, so it’s important they keep demonstrating momentum relative to expectations. They are continuing to position themselves so expectations don’t get out of control.
Awareness of Twitter’s brand has also gotten a boost from frequent tweets by public figures like U.S. President Donald Trump, who is among the platform’s most high-profile users. Global events like the Olympic games and government elections also help to drive user growth.
And as Twitter has worked to root out terrorist content and abusive trolls, advertisers’ perceptions of the platform are also improving, according to a survey conducted by RBC Capital Markets and Ad Age.
“Twitter’s video ad product continues to perform well as advertisers continue to look for higher quality online video impressions,” wrote Morgan Stanley analyst Brian Nowak, a long-time Twitter bear who upgraded the stock to equal-weight last week, citing improved personalization that’s keeping users on Twitter for longer.
Twitter posted net income of $61 million, or 8 cents a share, in the first quarter, Marking its second quarter of profit under generally accepted accounting principles. That compared with analyst projections for a net loss of 2 cents on average. Profit excluding some costs was 16 cents a share, exceeding estimates for 12 cents.
The company gave a second-quarter outlook for adjusted earnings before interest, taxes, depreciation and amortization of $245 million to $265 million. Analysts estimated $218 million.
Bloomberg LP produces TicToc, a global breaking news network for the Twitter service.
While Twitter seems to have found a path for growth, Dorsey is being pressed to follow in the footsteps of Facebook CEO Mark Zuckerberg and testify before U.S. Congress about data privacy. Twitter, Facebook and Google are all facing calls for potential regulation on internet companies following revelations that political-consulting firm Cambridge Analytica harvested private data from some 87 million Facebook users. Twitter itself was found to be overrun by Russian bots during the 2016 U.S. election cycle.
Twitter continues to address criticism that it hasn’t done enough to combat the spread of misinformation, harassment and manipulation from automated posts. Last month Dorsey asked the public to propose solutions to make the social network a nicer place by measuring “collective health, openness, and civility of public conversation.” Twitter is working on a “transparency center” to show how much political campaigns spend on advertising, and the company endorsed the Honest Ads Act, a Senate bill that would subject online political ads to the same sort of disclosure rules that govern similar content on TV and radio.
Twitter said it’s limited the ability of users to perform coordinated actions across multiple accounts, which has resulted in roughly 90% fewer users creating fake or automated engagement through the social media dashboard TweetDeck. In the first quarter, the company said it removed more than 142,000 applications connected to Twitter that violated developer rules and were collectively responsible for more than 130 million “low-quality” tweets during the same period.