Twitter Fourth-Quarter Earnings Beat Estimates, Revenue Falls Short

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Jack Dorsey

"The president's use of Twitter has broadened the awareness of how the platform can be used," CEO Jack Dorsey said of Donald Trump's constant use during an analyst call.

Twitter on Thursday beat analysts' expectations for earnings per share in its fourth quarter before the opening bell but missed revenue estimates, prompting a steep fall in its stock price in premarket trading.

The San Francisco-based company, led by CEO Jack Dorsey, reported adjusted earnings of 16 cents per share on revenue of $717 million, up from a year-earlier $710.5 million.

Analysts had forecast per-share earnings of 12 cents on revenue of $737 million from the 140-character messaging service often used by U.S. President Donald Trump to get around the traditional media filter to reach his more than 24 million Twitter followers.

"The president's use of Twitter has broadened the awareness of how the platform can be used, and it shows the power of Twitter. When he tweets, it sparks conversation and discussion," Dorsey told analysts during a morning call.

At the same time, Dorsey said Trump's personal use of Twitter was not driving growth in active engagement. "We don't see a benefit to the top of the funnel from all of the activity during the election period," he said, recalling the latest financial quarter, when Twitter partnered with Bloomberg, BuzzFeed News and PBS Newshour to offer live coverage of the 2016 election debates, election night and the inauguration.

No mention was made on the call about Twitter in July moving to ban Breitbart News editor Milo Yiannopoulos for tweets harassing Ghostbusters star Leslie Jones or of recent measures taken to limit abuse and harassment by users on the platform.

BTIG analyst Richard Greenfield on an investment note issued on Wednesday said Trump's 24/7 use of Twitter could be boosting business for the social messaging app.

"The incessant news flow from the Trump administration playing out on Twitter and the ensuing global reaction pushes Twitter users to be increasingly engaged with the platform," Greenfield wrote in a note to his clients. "The Twitter President gives Twitter a second chance," he added.

User growth as well as accompanying advertising revenue were on the minds of investors on Thursday. The microblogging platform's monthly active users grew slightly to 319 million, up from 317 million from last quarter.

The challenge of active user growth is not being monetized just yet. Twitter posted a net loss of $167 million, against a year-earlier loss of $90 million. Stripping out onetime expenses, the company said it would have earned $119 million, or 16 cents a share.

Dorsey in an earlier statement offered guidance certain to disappoint investors. "While revenue growth continues to lag audience growth, we are applying the same focused approach that drove audience growth to our revenue product portfolio, focusing on our strengths and the real-time nature of our service. This will take time, but we're moving fast to show results," he said.

During the morning analyst call, Dorsey pointed to a "reset" for Twitter in 2016 that would pay dividends in 2017 with increased user engagement. The challenge is the company is still struggling to profit from being useful to consumers.

"Transformations are difficult, and this one was especially difficult," Dorsey told investors.  

Slumping advertising revenue, the main driver of company sales, came to $638 million, down year-over-year, with mobile advertising accounting for 89 percent of that total. U.S. revenue was $440 million, down 5 percent from a year ago.

Twitter execs on the call talked about the live-streaming experience for users, which during the latest quarter included programming of National Football League games over 10 weeks. Still, the social messaging app faces strong competition from Facebook and Snapchat, which already focus on video.

Shares in Twitter slid by 10 percent to $16.81 before the market opened. Stock in the microblogging platform traded soon after the opening bell on the New York Stock Exchange, down nearly 11 percent, or $2.04, to $16.67.

Feb. 9, 8:45 a.m. Updated with comments by senior Twitter executives during a morning analyst call.

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