Despite losing nearly 10 million users from the previous quarter, Twitter blew past Wall Street earnings and revenue estimates when it reported its third quarter financials on Thursday morning — sending its stock price surging in the process.
Twitter posted $758 million in revenue and earnings of 21 cents per share — easily passing analyst estimates of $702.6 million in sales and earnings of 14 cents per share. Revenue increased 29 percent year-over-year. Ad revenue, at $650 million for the quarter, accounted for most of its sales and also increased 29 percent year-over-year.
Most notably, the San Francisco-based company dropped 9 million users during the third quarter, falling from 335 million monthly users to 326 million monthly users. It’s the second straight quarter Twitter has posted declining monthly user growth. Daily active users increased 9 percent year-over-year, but Twitter continued to not disclose the total number of DAUs on its platform.
Twitter attributed the drop in users to several factors, including new European data protection laws, product changes to reduce automated accounts, and “decisions we have made to prioritize the health of the platform.”
Wall Street didn’t seem to mind the drop in users at first blush, with Twitter shares increasing 13 percent in pre-market trading to $31.15 per share.
Twitter chief Jack Dorsey, in a statement accompanying the earnings report, said the company has been able to “prioritize the long-term health” of the platform by doing a better job of removing troll accounts.
“We’re achieving meaningful progress in our efforts to make Twitter a healthier and valuable everyday service,” Dorsey said. “We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up. We’re also continuing to introduce improvements that make it easier for people to follow events, topics and interests on Twitter, like adding support for U.S. TV shows in our new event infrastructure.”
Improving the “health of the conversation,” as the company routinely puts it, has been a primary focus for Twitter this year. Twitter joined several other Silicon Valley powerhouses, including Facebook and Google-owned YouTube, in permanently suspending digital shock jock Alex Jones in September. The week before, Dorsey went to Washington, D.C. and told Congress the company doesn’t target conservative voices. “Impartiality is our guiding principle,” Dorsey said.
Like Facebook, Twitter has scrambled to weed out trolls spreading fake news before the 2018 U.S. midterms. Twitter removed hundreds of accounts tied to the Iranian and Russian governments in August for sharing political misinformation.
For Twitter shareholders, it’s been a turbulent year heading into Thursday. Twitter shares enjoyed a significant rally in the first half of 2018, increasing from about $25 per share to $45 per share between the first of January and mid-July. But the company had since given up most of its gains for the year, after it reported a decrease in monthly users — from 336 million to 335 million — during the second quarter. Twitter shares closed Tuesday trading at $27.54 per share.
The company held a call at 8 a.m. ET to discuss its earnings.