Twitter Beats Analyst Expectations, But Slowing Growth of Active Users is Troubling


If there ever was a year-end financial result that can be best described as mixed good and bad news, it’s Twitter’s year-end and fourth quarter results. The microblogging service company, which went public last year, beat analyst estimates considerably by turning in $242.7 million in fourth quarter earnings and earnings per share of $0.02. Through a Thomson Reuters survey of financial analysts the company would report quarterly revenue of $218 million, and a loss of two cents per share.

That’s cause for celebration, particularly for a company that makes 75 percent of its revenue in the wild, wild world of Web-based advertising. In fact, ad revenue grew more than 121 percent over the year-ago quarter to $220 million. The company attributes this to its efforts to make its platform more accessible to a broader range of advertisers by launching its self-serve advertising platform to small and medium-sized businesses in the UK, Ireland and Canada. The company also completed a purchase last year of MoPub, Inc. a mobile-focused advertising exchange designed to make it easier for advertisers to automate and scale their advertising buys.

During the fourth quarter, Twitter reported 241 million monthly active users. Monthly active mobile users numbered around 184 million, or 75 percent of the total. The not-so-great news is that user growth appears to be on the decline.

“If Twitter’s core user growth cannot be sustained, its ability to drive future revenue growth — and therefore profits — is essentially under fire,” noted TechCrunch’s Alex Wilhem.

But the company’s strong debut is still something to be impressed by. Last November, when the company went IPO, its stock was about $26 per share. Since then, it has reached to over $70 per share (though it’s in a decline today, down more than 18 percent to $52.22). Analysts are comparing this strong IPO to the unmitigated disaster that was Facebook’s public launch in 2012.

Despite the sluggish growth of users, analysts are duly impressed by the results, as is Twitter management.

"Twitter finished a great year with our strongest financial quarter to date," said company CEO Dick Costolo in a statement announcing the results. "We are the only platform that is public, real-time, conversational and widely distributed and I'm excited by the number of initiatives we have underway to further build upon the Twitter experience."

Edited by Cassandra Tucker
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