Twitter (TWTR) Q4 earnings drop, miss Street view; stock gains on user growth

Microblogging platform Twitter Inc. (NYSE: TWTR) reported a drop in fourth-quarter earnings despite an increase in revenues. Earnings also fell short of expectations. However, the company’s stock gained sharply early Thursday, soon after the announcement, as the market responded positively to the strong user growth.

Also see: Facebook Q4 earnings, revenue exceed estimates

The number of average monetizable daily active users grew 21% year-over-year to 152 million in the fourth quarter. In the US, their number increased by 15% to 31 million. Analysts had predicted a lower number. The user base expanded mainly due to product improvements and the use of technology, including machine learning, to enhance user experience.

The top-line benefited from an increase in advertising, the company’s main revenue source, and rose by 11% to $1.01 billion. It was slightly above the consensus estimate. Revenues increased in all the geographical segments.

Earnings Fall

Earnings, on an adjusted basis, dropped to $0.25 per share from $0.31 per share last year and missed the Street view. Net income, including special items, was $118.77 million or $0.15 per share in the three-month period, compared to $255.3 million or $0.33 per share a year earlier. The bottom-line was negatively impacted by a 22% increase in costs and expenses.

“Entering 2020, we are building on our momentum — learning faster, prioritizing better, shipping more and hiring remarkable talent. All of which put us in a stronger position as we address the challenges and opportunities ahead,” said CEO Jack Dorsey.

Outlook

For the first quarter, the management expects total revenues to be in the range of $825 million to $885 million and operating income to be around $30 million. For the whole of 2020, the company forecasts stock-based compensation expense to be between $425 million and $475 million. Full-year capital expenditure is expected to be in the $775-$825 million range.

Ad Server

Twitter said it is on track to complete the rebuilding of its ad server in the first half of 2020. A key development in the fourth quarter was the launch of Twitter Privacy Center, with the aim of providing more clarity on the use of information shared on the platform.

Related: Twitter Q3 2019 Earnings Conference Call Transcript

Twitter shares suffered a massive loss after its dismal third-quarter report and remained low since then. The stock, which has been on the recovery path since the beginning of 2020, made strong gains during Thursday’s pre-market trading session.

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