Twitter Revenue Up 14% - User Growth Disappoints

The third quarter saw continued increases in Twitter’s overall traffic, driven by the resumption of sporting events, the presidential election cycle, and the ongoing COVID-19 pandemic. Despite this, the growth was insufficient to satisfy investor expectations. 

While Twitter exceeded expectations for both revenue and net income, Wall Street focused on the platform’s user growth, which was minimal and resulted in a decline in share prices during after-hours trading. Twitter’s mDAUs – the company’s key metric for measuring daily active users who are able to be monetized – reached 187 million during the third quarter. This represents a slight increase from the 186 million reported in the second quarter of this year, but a 29% increase compared to the 145 million recorded in the same quarter of the previous year. Analysts surveyed by FactSet had predicted 195 million mDAUs.

The rate of mDAU “growth” slowed considerably when examining figures specific to the U.S. market. The average U.S. mDAU remained at 36 million for the third quarter, matching the number from the second quarter. Essentially, U.S. mDAUs have remained stable. This figure is an increase from the 30 million mDAUs reported in the third quarter of 2019. Meanwhile, average international mDAU was 152 million for the third quarter, up from 115 million in the same period last year and 150 million in the prior quarter.

Shares experienced a nearly 15% decrease in value during after-market trading.

Twitter announced a net income of $29 million for the third quarter, or 4 cents per diluted share, which is a decrease from the $47 million (5 cents per diluted share) earned during the same period last year. Adjusted earnings reached 19 cents per share.

The company’s revenue totaled $936 million, a 14% increase year-over-year and a 37% increase compared to the second quarter. Analysts had forecasted revenue of $777 million. 

Twitter’s advertising revenue also increased by 15%, reaching $808 million. Overall ad engagement rose 27% compared to the same period in 2019. The return of live events, along with new and previously postponed product launches, contributed to the growth in ad revenue, according to Twitter CFO Ned Segal.

“We also achieved progress with our brand and direct response offerings, through updated ad formats, enhanced measurement capabilities, and improved prediction models. We are confident that our expanding audience, combined with ongoing improvements to our revenue products, new events and product introductions, and the favorable response from advertisers to the choices we’ve made as the service has grown, will deliver strong results in the future,” he stated.

The U.S., Twitter’s largest market, generated $513 million in revenue, representing a 10% year-over-year increase. 

However, Twitter cautioned that the upcoming holiday season and the U.S. election could potentially influence advertiser behavior.