The social media player playing a catch-up game with its rivals, Twitter (TWTR, Financial), posted the third quarter results on October 27 meeting analyst expectations and reporting decent top and bottom-line figures. However, investors were not very happy with the results as the management have taken a cautious stand with respect to the fourth quarter guidance. Let’s quickly peek into the quarter highlights and assess the performance of Twitter.
The quarter numbers
Revenue for the quarter came in at $361 million, beating analysts’ estimates of $351 million. This was a whopping increase of 114% from last year’s similar quarter when it had reported $169 million. Monthly active users (MAUs) growth was the key to the company’s third quarter revenue improvement as Twitter added 16 million MAUs during the quarter.
Third quarter loss narrowed to $175.5 million, or $0.29 per share, from a loss of $64.6 million, or $0.48 a share, a year back. On an adjusted basis, Twitter posted a profit of a penny a share meeting Wall Street expectations.
The key drivers
CEO Dick Costolo stated during the earnings call, “We had another very strong financial quarter. I'm confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services."
As average mobile monthly active users represented about 80% of the total MAUs in the third quarter, and timeline views reached 181 billion in the quarter exhibiting an increase of 14% year-over-year revenue showed a prominent uptick in the quarter. As Twitter’s total ad revenue is generated currently majorly through mobile ads, up 70% from a year ago, it’s a recommendable achievement in the social media market which is ruled by intense competition.
During the quarter, Twitter continued with its expansion plans of Twitter Ads in additional 12 markets in Central, Continental and Eastern Europe. Twitter also expanded its customer base in 12 new countries – this has obviously helped in building the global monthly active user base for the company.
Twitter has launched a slew of new and improved products in the recent months, including in-app promotions and video ads. These developments are intended to help the company win a piece of the burgeoning social advertising market which is currently dominated by Facebook (FB, Financial).
Twitter’s CEO said, “Across the landscape of $1 billion digital advertising businesses, we are the fastest growing business within that landscape… we love the engagement rates we're getting with our ads."
Outlook for upcoming quarter remains a cautious one
Though the company’s results were pretty promising, the big concern according to investors is the lower than expected user growth that has put a ceiling on ad revenues. Twitter has provided a forecast of about 80% growth in revenue year-over-year in the fourth quarter, down from 109% in the third quarter.
Revenue is being projected to be in the range of $440 million to $450 million for the fourth quarter which stands below the Street’s expectations which has sent the stock spiralling downwards nearly 10% in extended trading.
Final word
Twitter’s investors are a bit disappointed with the forward guidance of the company, but as the management sounds upbeat on generating more ad revenue in the near future, its best to stay invested and observe its stock movement at least till the final quarter of the fiscal year. Let’s stay tuned.
