Twitter (TWTR): After a mixed third quarter, should you be pleased or worried?

Shares of Twitter Inc. (NYSE: TWTR) were down 10% on Wednesday after the company delivered mixed results for the third quarter of 2021 a day ago. Although revenue matched projections, the company delivered a quarterly loss missing expectations of a profit. Despite seeing growth, user numbers too fell short of estimates. On the flip side, ad revenues increased during the quarter and the company continues to gain users in international markets. Here’s a look at some of the positives and negatives from the report:

User growth

Average monetizable daily active usage (mDAU) in Q3 was 211 million, up 13% year-over-year and 3% sequentially. The YoY growth rate of 13% was higher than the 11% reported in Q2 which is a positive. Average mDAU in the US rose 4% YoY to 37 million while international mDAU increased 15% YoY to 174 million.

The growth in the user base was driven by product improvements and global conversation around current events. Twitter mentioned that the health of its platform is at the top of its priorities list. During the third quarter, the company rolled out a new feature called Safety Mode, which will allow users to temporarily block accounts for offensive or unwelcome behavior. Twitter is working on allowing users to set their own norms and boundaries with regards to interactions on its platform.

Looking ahead, Twitter expects mDAU for the fourth quarter to grow at or above the third quarter rate of 13% on a YoY basis.

Revenue growth

Total revenue in Q3 increased 37% YoY to $1.28 billion. Revenues in the US increased 45% to $742 million while international revenue grew 28% to $542 million. The company’s second largest market, Japan, grew 20% and contributed 12% of total revenue in Q3.

Total advertising revenue increased 41% to $1.14 billion. US advertising revenue increased 51% to $647 million while international ad revenue rose 30% to $493 million. The impact from Apple’s (NASDAQ: AAPL) privacy-related iOS changes on third quarter revenue was lower than expected but Twitter feels it is still early to ascertain the long-term effects.

For the fourth quarter of 2021, total revenue is expected to range between $1.5-1.6 billion.

Concerns

There are a few pain points in Twitter’s Q3 report. First, the company delivered an adjusted loss per share of $0.54, missing expectations of a quarterly profit. Second, despite recording a YoY growth, mDAU of 211 million came slightly below estimates of 212 million.

In terms of geography, US mDAU of 37 million remained unchanged from the second quarter pointing to possible market saturation. Lastly, the advertising growth rates in the third quarter were lower compared to the second quarter.

All in all, despite the growth in revenue and users, Twitter’s quarterly loss has not gone down well with investors and there is a cautious sentiment surrounding the stock at present.

Click here to read the full transcript of Twitter’s Q3 2021 earnings conference call