Why Twitter’s Powerful Earnings Beat Wasn’t Enough

Twitter Inc. (NYSE: TWTR) released its fourth-quarter financial results before the markets opened on Thursday. While everything on the financial side looked impressive for the quarter, investors seemed less enthused about user growth.

The social media firm posted $0.31 in earnings per share (EPS) and $909 in revenue, which compares with consensus estimates of $0.25 in EPS and $869.5 million in revenue. In the same period of last year, Twitter said it had EPS of $0.19 on $731.56 million in revenue.

The firm announced that starting this quarter, in addition to sharing the growth in monetizable daily active users (mDAU) as it has since 2016, management is disclosing the absolute number of average mDAU (previously referred to as DAU), for both the U.S. and international markets. As mDAU will be the metric used to show the size of its audience and engagement going forward, the firm will discontinue disclosing monthly active users (MAU) after the first quarter.

During the quarter, average mDAU were 126 million for the fourth quarter, compared to 115 million in the same period of the previous year and to 124 million in the previous quarter.

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At the same time, MAU were 321 million for the quarter, compared to 330 million in the same period of the previous year and to 326 million in the previous quarter.

Looking ahead to the first quarter, the firm expects to see total revenue in the range of $715 million to $775 million and GAAP operating income between $5 million and $35 million. Consensus estimates call for $0.18 in EPS and $762.43 million in revenue.

Jack Dorsey, Twitter’s CEO, commented:

2018 is proof that our long-term strategy is working. Our efforts to improve health have delivered important results, and new product features like a single switch to move between latest and most relevant Tweets have been embraced by the people who use Twitter. We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service.

Shares of Twitter closed Wednesday at $34.16, in a 52-week range of $26.19 to $47.79. The consensus price target is $34.54. Following the announcement, the stock was down over 7% at $31.64 in early trading indications Thursday.

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