In an very un-Twitter move, the company completely beat out the increasing decline of its business that tech observers were expecting.
This is a hugely positive sign for the company, which has seen continued bad news on the whole company operating front. Not only was it able to generate more money than expected, its user numbers also made a surprising spike. Twitter’s faced a ton of scrutiny as to whether it can be another big player in the advertising space, trying to pitch its unique product compared to others like Facebook and Snap.
Now the company is starting to see some good news roll in, and it’ll have to figure out how to capitalize on that momentum. The company said it generated $548 million in revenue with earnings of 11 cents per share. It also added 9 million new users, bringing it to 328 million total monthly active users. Wall Street was looking for earnings of a cent share on revenue of $511.9 million, as well as a much smaller user growth number.
It’s still a decline in revenue. In the first quarter last year, Twitter generated $595 million in revenue, which means its total revenue fell 8% year-over-year. Its revenue from its data licensing and other revenue is growing — up $10 million year-over-year in the first quarter — but its advertising revenue is still in decline. Twitter’s expenses got their own bullet point in this report, where the company said its expenses were down 5% year-over-year in the first quarter.
Twitter is still in the midst of figuring out how to make its product more approachable and juice that user growth. One part of that includes curving abuse on the platform, where the company said explicitly in the earnings report that it had started to make an impact.
“We’ve made meaningful progress toward identifying and removing accounts that demonstrate abusive behavior and, as a result, we’re seeing less abuse reported across the service,” Twitter said in its earnings release.
It’s still going to have to make sure that these changes don’t confuse or alienate existing users, but its overall base appears to be growing. The company, also seemingly allergic to altering its product, has also made some changes in recent months to trim down the complex nature of Twitter. That includes increasing the number of characters available in general by removing @names from the Tweet text as well. Twitter also said its daily active usage grew 14% year-over-year, though there were no specifics (which has never happened in tech reports ever).
“We gave people more characters for their replies by removing @names from the Tweet text, we’re building a unified API platform, and we’ve launched new Direct Message APIs, creating a more cohesive product experience for consumers and developers,” the company said.
On the scale of good news and very good news, this is going to be logged much closer to the latter. Twitter’s stock is up more than 11% in early trading this morning, which is one of the biggest bumps it’s seen since talks of acquisition of the company popped up. Shares came down to reality after a while and are up about 9% in early pre-market trading.
Everyone’s favorite line in the earnings report — the company’s massive stock-based compensation — also appeared to drop off.
Last quarter, it became apparent that Twitter’s advertising business was stalling. As if its user growth problems weren’t big enough, Twitter’s pitch to Wall Street seemed to be getting more and more difficult — especially given that most of its best days came during days that there were talks about a potential acquisition for the company. During the last call, CEO Jack Dorsey said the goal was to simplify its advertising products.
Twitter now has to deal not only with Facebook being the juggernaut. It’ll be viewed in the scope of Snap as well, which continues to grow rapidly from both a user and revenue front despite its mounting costs. With Snap’s successful IPO, Twitter may have to deal with increased expectations to perform given that many other players are finding themselves able to navigate major changes in the advertising ecosystem.
This is also going to most likely buy Dorsey, who has said he will continue to run both companies, additional time. Twitter’s exodus at its top level continues, and that’s led to some impressive compensation packages for some of its executives like Anthony Noto. But buoying that stock price — and showing better performance — is going to naturally help attract talent.
In the past three months, Twitter’s stock fell yet another 13% or so, continuing to compound its problems. But in the larger scope, Twitter’s stock is only marginally down in the past year. So Twitter may have, for now, found a sort of leveling-off point.