SAN FRANCISCO -- Twitter on Thursday reported its first profitable quarter and a growth in ad sales, but the tech company is still struggling to attract new users.
"We're proud of the steady progress we made in 2017 and we're confident in our path ahead," said Twitter co-founder and chief executive Jack Dorsey in a conference call. "We have significant opportunity ahead of us to put Twitter in as many people's hands as possible and make the service more relevant to more people every single day."
Twitter's stock at one point rose more than 23 percent in pre-market trading to $33.28 per share before closing at $30.18.
The company, which has been slashing expenses, turned a profit of $91 million, or 12 cents per share, for the first time in its 12-year history, beating Wall Street's expectations.
But the San Francisco tech company continues to face a number of challenges, including a string of executive departures. Known for its real-time nature, Twitter also competes with larger tech outfits, including Facebook and Google, for advertising dollars.
"At best we can look at the most recent period's results as marking an important milestone in the company's turnaround, perhaps bringing the future forward by a quarter," Brian Wieser, an analyst for Pivotal Research Group, wrote in a note. "While we can see this as positive for sentiment and investor confidence, it's hardly a game-changer for Twitter."
In January, Twitter Chief Operating Officer Anthony Noto announced he was leaving to become the chief executive of SoFi. Some analysts and investors raised concerns that Noto's departure could hinder the company's turnaround efforts.
Dorsey started off the conference call by thanking Noto for his contributions and said that executives from his team will be taking on Noto's roles.
"We haven't skipped a beat and we're really excited about looking at this [organization] in a new way but we have a lot of strength around the table and a lot of confidence to continue the strategy," Dorsey said.
Twitter, like Facebook, has also been under pressure to do more to combat misinformation, fake accounts, hate speech and harassment.
The company has also been making changes as part of an effort to make the site easier to use and toughened its rules around online abuse. It doubled the number of characters allowed in a tweet to 280 in September.
Expanding the length of a tweet not only improved engagement among users, but also gave them more room to express their thoughts, Dorsey said. Users would hit the character limit in a tweet and then abandon a post altogether.
But Twitter's monthly active users remained at 330 million in the fourth quarter, which was flat compared with the third quarter but increased by 4 percent compared with the same period in the previous year. Twitter attributed its lack of user growth to Safari's third-party app integration changes, seasonality and its efforts to crack down on fake accounts and spam.
While the number of international users grew slightly from the third to fourth quarter, Twitter saw a decline in the number of U.S. users. In the fourth quarter, Twitter lost 1 million monthly active users in the United States, reducing the total to 68 million.
The number of Twitter's daily active users, though, grew 12 percent in the fourth quarter compared with the same period in 2016, but the company does not disclose the total number.
Fueled by video ad sales, Twitter increased its revenue by 2 percent to $732 million in the fourth quarter, beating the $686.4 million that analysts surveyed by Bloomberg expected. Sales in the United States dropped by about 8 percent in the fourth quarter, but the company grew its revenue internationally including in Japan.
Excluding certain one-time expenses, Twitter earned 19 cents per share in the fourth quarter, above expectations of 14 cents per share.
"The results we saw [Thursday] affirm the direction of Twitter's 2017 strategy focused on live video. But we won't know if this is working until we see user growth," Forrester Research analyst Erna Alfred Liousas said.
With major events such as the Olympics kicking off this year, Twitter executives said they're an opportunity to attract users to the site but they also noted the company expects it to have less of an impact on ad sales compared with the past. Businesses are purchasing ads for a longer period of time instead of just for one event, said Twitter's Chief Financial Officer Ned Segal.
Business on 02/09/2018