NEW YORK: Twitter Inc said on Thursday revenue in the first quarter would be weaker than expected while full-year operating costs would rise, sending shares down more than 7% in premarket trading.
Investors’ concerns over the weak forecast overshadowed strong fourth-quarter results for the social media company that included a 24% jump in total revenue, helped by growth in its video advertising business.
Monthly active users totalled 321 million in the fourth quarter, in line with analysts’ forecasts but down from 330 million a year earlier and 326 million in the third quarter.
Starting in the current quarter, Twitter said it would stop disclosing the number of monthly active users, a statistic internet companies have routinely reported over the past decade. Instead, the company will provide monetisable daily active users or the number of people who log in and are exposed to ads on Twitter on a daily basis.
“We want to align our external shareholders around one metric that reflects our goal of delivering value to people on Twitter every day and monetising that usage,” said chief financial officer Ned Segal.
Twitter said it expected total revenue of between US$715 million and US$775 million for the first quarter of 2019. The midpoint of that range was below analysts’ average estimate of US$765 million, according to IBES data from Refinitiv.
Operating expenses were expected to surge about 20% year-on-year in 2019 due to efforts to improve the health of its platform, exceeding analysts’ average estimate of 12%.
Those higher costs could eat into Twitter’s future earnings, some analysts said.
“Yes, total user numbers are down, but we’ve known for a while now that Twitter has a fake-users problem and is trying to deal with it, so that shouldn’t come as a surprise to anyone,” said Clement Thibault, an analyst at global financial platform Investing.com.
“Higher operating expenses, on the other hand, are a bigger problem, as I anticipate Twitter’s margins and profits to shrink considerably in 2019.”
Increased spending is a common theme across social media companies, including Facebook and Google, as they double down on efforts to clean up their respective platforms, Summit Insights analyst Jonathan Kees said.
“As Twitter would describe it, pursuing ‘health’ issues are good for their advertiser base as they feel better to advertise there,” Kees said.
Twitter also expects capital expenditure of between US$550 million and US$600 million in 2019, well above analysts’ average estimate of US$415 million.
Overall revenue in the fourth quarter rose to US$909 million, handily beating analysts’ estimate of US$868.2 million.
Total advertising revenue surged 23% to US$791 million in the quarter, with more than half of that figure coming from video ads placed by corporate clients.
Revenue from data licensing and other non-advertising businesses rose 35% from a year earlier to US$117 million.
Excluding some items, Twitter reported a quarterly profit of 31 cents a share, beating the average estimate of 25 cents.
The number of average monetisable daily active users rose to 126 million in the fourth quarter from 115 million a year ago and 124 million in the previous quarter. Shares were down about 7.5% in premarket trading at US$34.16, after closing at US$34.16 on Wednesday.