Twitter Credits Efforts to Improve ‘Health’ of Conversation for Strong Q2 User, Revenue Growth

Wall Street responds to 14% year-over-year jump in users

Twitter credited its efforts to improve the “health” of conversation on its platform as a key driver of strong user and revenue growth when it reported its second quarter earnings before the bell on Friday.

The San Francisco-based company reported $841 million in Q2 revenue, topping analyst estimates of $829.1 million, and earnings per share of $1.43, thanks to a one-time tax credit; Not counting the credit, Twitter posted adjusted EPS of 5 cents, coming in below Wall Street’s projections of 19 cents EPS. The company’s sales increased 18% year-over-year, with Twitter pointing to strong advertising growth in the U.S. as a main reason for its success.

Twitter now has 139 million “mDAU,” or what the company calls monetizable daily users, representing an increase of 14% year-over-year. The company entered the quarter with 134 million mDAU. Twitter said 29 million of its mDAUs come from the U.S., or 10% more than it had at this time last year.

This was the first quarter Twitter did not share its monthly user count, something the company said in April it would stop reporting moving forward.

“We continue to make progress on health,” the company said in its letter to shareholders. “In Q2 we made our rules easier to understand and continued our work to proactively identify and address malicious activity, resulting in an 18% drop in reports of spammy or suspicious behavior across all Tweet detail pages, which show the replies to any given Tweet on our service.”

The company said it’s “highest priority” remains making its app less toxic and more enjoyable for users. Twitter, in its shareholder letter, added it’s working to “proactively reduce abuse” by sharpening its internal tools to better spot “bad actors.”

To meet these objectives, though, Twitter is spending more. Total operating expenses increased 21% from last year to $766 million, as the company looks to meet its “strategic priorities” and hire more workers.

Wall Street liked the report at first blush, with Twitter’s stock increasing 7% in pre-market trading to $40.79 per share.

Total ad revenue increased 21% year-over-year to $727 million for the quarter; Twitter said its ad revenue in the U.S. climbed 29% when compared to the same period last year. Twitter offered guidance of $815 million to $875 million in revenue next quarter.

Heading into Friday morning, Twitter had enjoyed a strong first half of 2019, with the company’s stock price increasing more than 30% since the beginning of the year.

The company has spent much of the last year looking to improve the “health” of conversation on the app, as CEO Jack Dorsey and other company reps have repeatedly put it. On this front, Twitter continued to tinker with what is and isn’t allowed on its platform during the second quarter.

In June, Twitter shared it would start labeling “abusive” tweets from political leaders. Previously, the company had said it wouldn’t take action against politicians — even when their tweets violate company policy, because it “would hide important information people should be able to see and debate.” Now, Twitter’s “safety” team will flag tweets from politicians that break its rules, but that the company believes should otherwise remain up because it’s “in the public’s interest.”

Twitter will hold a call to discuss its Q2 results at 5:00 a.m. PST.