Twitter tops expectations with first $1 billion quarterly revenue, but outlook lags

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© Reuters. FILE PHOTO: The Twitter App loads on an iPhone in this illustration photograph

By Elizabeth Culliford

(Reuters) – Twitter Inc (N:) hit $1 billion in quarterly revenue for the first time, topping expectations and also beating user growth estimates in a rebound from previous troubles with ad platform bugs and unusually low seasonal demand.

But the company also posted fourth-quarter net income lower than expectations, at $119 million, or 15 cents per share, down from $255 million year-over-year. Twitter also forecast first-quarter revenue between $825 million and $885 million, behind many Wall Street estimates and said costs would grow about 20% in 2020 as it increases headcount and builds out a new data center.

Twitter saw most revenue growth in the United States, a major market where the company will this year face scrutiny over its efforts to tackle misinformation around the presidential election in November.

Twitter said improvements to its machine-learning models to provide more relevant content and notifications contributed to its growth in average monetizable daily active users (mDAU).

This number of daily users who log in through twitter.com or Twitter applications that show ads​ hit 152 million, beating analyst expectations of 147.5 million, according to IBES data from Refinitiv. This metric was up from 126 million year-over-year.

Twitter has continued its efforts to drive up user numbers by making the platform more user-friendly, for example, allowing people to follow topics, and by trying to clean up abusive content. Late last year, it launched a feature for users to hide certain replies on their tweets.

The company’s quarterly revenue rose 11% from a year earlier to $1.01 billion, beating Wall Street expectations of $996.7 million, based on IBES data from Refinitiv. Total advertising revenue was $885 million, an increase of 12% year-over-year.

Still, its revenue outlook for the first quarter was between $825 million and $885 million, compared to analyst expectations of $872.6 million, according to IBES data from Refinitiv.

Twitter’s total U.S. revenue grew 17% year-over-year to $591 million, compared with a 3% uptick in international revenue.

The company attributed the slower overseas figures to factors including a decrease in a mobile ad product’s revenue in Asia Pacific.

Twitter also said it was prioritizing efforts to protect the integrity of election-related conversations.

In November, Twitter banned political ads amid growing pressure on social media companies to stop accepting ads containing misleading or false information.

But this week’s Iowa caucuses still saw the platform used organically to spread false allegations of voter fraud and conspiracy theories over the delayed results of the first key contest of the election.

On Tuesday, Twitter announced it would apply “false” warning labels to tweets containing synthetic or deceptively edited forms of media and remove such media if it is likely to cause harm.

On a call with reporters earlier this week, Twitter executives declined to answer questions on the resources it would put toward spotting manipulated media, saying it would consider user reports and build relationships with “third-party experts.”

Quarterly total operating expenses, including cost of revenue, rose by 22% year-over-year to $854 million, partly due to a planned increase in headcount.

The company expects first-quarter operating income to be between $0 million and $30 million.

It said it expects an approximately 20% increase in operating expenses in 2020, as it grows headcount by 20% or more in 2020 and it also builds out a new data center. It said capital expenditures would be weighted towards the second half of the year.