Twitter recently set out an ambitious plan for growth, spurring a wave of optimism in the stock. Thursday’s earnings were the first opportunity to gauge the company’s progress around its goals, but an earnings beat wasn’t enough to assuage investors.
Twitter (ticker: TWTR) shares were down 10.3% in late trading Thursday.
The social media company reported net income of $68 million, which amounts to 8 cents a share, versus a net loss of $8.4 million, or a penny a share in the year-ago period. Adjusted for stock-based compensation among other things, earnings were 16 cents a share. Revenue grew 28% to $1.04 billion
The consensus forecast for Twitter’s first-quarter adjusted earnings was 14 cents a share on revenue of $1.03 billion.
What appeared to rankle investors was Twitter’s guidance. The company said it now expected second-quarter revenue of $980 million to $1.08 billion. The mid-point of that range is below the $1.05 billion forecast by analysts–at a time when online ad rivals Alphabet (GOOGL), Facebook (FB), and Snap (SNAP) are delivering impressive results.
Twitter also cautioned that it expected costs and expenses related to growing its staff would increase 25% this year, ramping up the year progresses. Bringing aboard more staff will increase the company’s stock-based compensation costs, and Twitter said it now expected full-year stock compensation of $600 million, up from its prior estimate of $525 million to $575 million.
CFO Ned Segal described Twitter’s results as a “solid start” to the year, noting that initiatives such as app promotion and brand advertising accelerated. “Advertisers continue to benefit from updated ad formats, improved measurement, and new brand safety controls, contributing to 32% year-over-year growth in ad revenue in [the first quarter],” he said. In it shareholder letter, Twitter said it made “significant progress” on its direct response ad products.
The company grew its monetizable user base 20% in the quarter to 199 million compared with a year ago, up 4% sequentially, and roughly in line with analyst estimates. Twitter also reiterated its outlook around user growth, saying its base of users would increase in the low double-digit percentages for the rest of the year.
Twitter stock closed regular trading Thursday down 1% to $65.03, while the S&P 500 index was up 0.7%. Shares have gained 87% since Barron’s wrote a bullish cover story in June.
