Twitter Earnings Have Investors Looking Past Investment Costs

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Twitter’s earnings impressed, even though the bottom line number came in below expectations.

The stock rose 14.38% to $38.90 a share Thursday, after Wednesday’s strong revenue result exemplified Twitter’s ability to grow revenues solidly, while its peers experienced impact from regulation and the company ensured a healthier platform.

Twitter reported revenue of $1 billion, beating estimates of $996 million, much driven by monetizable daily active user growth of 21% to a total of 152 million, beating estimates of 147.5 million. Earnings per share, however, came in at 25 cents against expectations of 29 cents.

Twitter Q4 Earnings graphic

Management said it was making platform tweaks to ensure healthy and appropriate conversation amongst users around the 2020 election. Still, other product (advertising and platform) investments paid off, driving strong user and revenue growth.

This comes just after Facebook shares dipped after a strong revenue result was accompanied by management commentary that regulation on ad targeting will hold revenue growth back for the foreseeable future at least. And Google’s revenue result earlier in the week missed estimates, partly due to regulatory constraints.

But there are some profitability concerns, at least for the near-term, which investors seem to be happy to accept.

The earnings miss came as expenses grew 22%, with investments in headcount a large part of Twitter’s ongoing platform investments.

And Twitter guided for operating income of between break-even and $30 million, compared to analyst’s hopes for 163 million. Twitter said operating costs will grow another 20% for all of 2020, reflecting investments in head count and research and development, all of which support product improvements. 

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