By Elizabeth Culliford and Munsif Vengattil
(Reuters) – Twitter Inc on Tuesday beat quarterly sales and profit estimates but missed expectations on user growth and warned this rate would slow in the upcoming quarters as a boost from the pandemic fizzles.
The social media company said expenses would rise 25% or more in 2021 but projected that total revenue would grow faster than costs.
In the fourth quarter, Twitter said it had 192 million average monetizable daily active users (mDAU) – its term for the number of daily users who can view ads, up 26% from a year earlier. Analysts were expecting 196.5 million, according to IBES data from Refinitiv. Twitter said that user growth rates may decrease to “low double digits” beginning in the second quarter.
Twitter said user growth had been driven by product improvements and more global conversation from events like the COVID-19 pandemic and the U.S. election. Some temporary changes to reduce misinformation around the U.S. election had a small negative impact on global user growth, it said.
In a letter to shareholders, Twitter said the significant pandemic-related surge in users last year created challenges for future gains.
The social media company has been in the spotlight amid global debates over what is allowed on the site – from its ban on former U.S. President Donald Trump to its recent refusal to comply with an Indian government directive to block accounts linked to the farmers’ protest.
Twitter’s advertising business benefited from new ad formats and improved targeting, Chief Financial Officer Ned Segal said in the earnings release.
Ad revenue was $1.15 billion, up 31% from the same period a year ago. Analysts on average were expecting revenue of $1.19 billion, with ad sales totaling $1.05 billion.
Investors are looking past Twitter’s miss on user growth because of other positives during the quarter, including higher ad revenue, profitability and revenue guidance that was better than expected, said Hari Srinivasan, senior research analyst at Neuberger Berman.
Twitter acquired newsletter startup Revue last month. It also recently launched disappearing tweets called “fleets” as a low-pressure way for users to post on the site and said it had in late Q4 released a beta test of “Spaces,” its audio-chat room feature which has similarities with voice-based app Clubhouse.
The San Francisco-based company has previously said it is exploring other revenue streams such as subscriptions.
Net income rose to $222.1 million, or 27 cents per shares, from $118.8 million, or 15 cents per share a year earlier. Excluding items, Twitter earned 38 cents per share, beating estimates of 31 cents.
Twitter’s costs and expenses were $1.04 billion for the quarter, an increase of 21% year over year. It said it expected costs and expenses to rise partly due to plans to grow headcount by more than 20% particularly in engineering, product, design and research.
Twitter said it expected total revenue in the current quarter to be between $940 million and $1.04 billion, compared to estimates of $965.14 million.
It said it expected “modest impact” from the rollout of Apple Inc’s planned privacy changes to the iOS system.
(Reporting by Elizabeth Culliford in New York, Munsif Vengattil in Bengaluru and Sheila Dang in Dallas; Editing by Lisa Shumaker)