More than a year after making the first quarterly profit in its history, Twitter Inc. (NYSE: TWTR) resumed its stabilizing trend at the start of 2019 as revenues and earnings continued to climb. For now, the social media giant’s pivot toward censorship masked under the guise of combating abuse and harassment has not impacted the bottom line.
Q1 2019 Earnings Summary
- Net Income (YOY): $191 million (+213.1%)
- Revenue (YOY): $787 million (+18%)
- Daily Active Users (YOY): 134 million (+11.7%)
Revenues, Earnings Grow
Unlike in previous quarters, where Twitter made profit by cutting costs, the San Francisco-based company improved its bottom line through higher revenues and daily active users. Not having to make a tax payment and deferring investments to subsequent quarters also helped boost company profits.
The social media network recorded a 6% increase in daily users in the first three months of the year. By the end of the first quarter, Twitter had 134 million active users, up from 126 million during the previous three-month period. Sales jumped 18% to $787 million, topping analysts’ forecasts of $774 million.
Net income more than tripled from a year earlier to $191 million. That was the company’s sixth consecutive quarter of profitability after years of losses.
Twitter’s stock price surged on the news, gaining as much as 17.9% on Tuesday. The stock peaked at $40.53, the highest since last July. Prior to the rally on Tuesday, TWTR had gained more than 21% this year.
As The Wall Street Journal recently pointed out, Twitter is currently undergoing several platform-related changes to “promote healthy discourse.” This includes implementing machine learning algorithms to weed out abusive or offensive tweets. The algorithms have reduced such content by about 38%.
Purging questionable content and spam accounts cuts both ways: the last time Twitter implemented such swift reforms, it contributed to a drop in user accounts.
Twitter and other social media platforms have faced a growing backlash over furthering political agendas and suppressing free speech. The systemic de-platforming of Alex Jones last summer was only the tip of the iceberg; the company currently faces a $250 million lawsuit over allegations that it “shadow bans” conservatives.
Americans in general are also under the view that social media platforms like Twitter routinely censor opinions they don’t like. A Pew survey from June 2018 found that nearly three-quarters of Americans hold such a view. Members of the public are four times more likely to report that such platforms favour liberals over conservative than vice versa.
Twitter CEO Jack Dorsey has vehemently denied that his platform has an ideological bias.
“Let me be clear about one important and foundational fact: Twitter does not use political ideology to make any decisions, whether related to ranking content on our service or how we enforce our rules,” Dorsey told Congress in September. “We believe strongly in being impartial, and we strive to enforce our rules impartially.
Twitter’s path to sustainable profits took a step in the right direction at the start of 2019. Successfully growing daily active users, something Twitter has struggled to do in the past, will be key to addressing lingering concerns over profitability and revenue.
Disclaimer: Author holds no investment position in Twitter at the time of writing.