#Twitter warns user growth to slow, beats Q4 targets

Twitter on Tuesday posted 27 percent user growth, missing Wall Street estimates, and warned this rate would slow in the upcoming quarters as a boost from the pandemic fizzles.

The social media company, which beat quarterly sales and profit estimates, said expenses would rise 25 percent or more in 2021 but projected that total revenue would grow faster than costs.

Shares closed up 2.9 percent at $59.87 and were up another 3 percent after hours.

In the fourth quarter, Twitter said it had 192 million average monetizable daily active users (mDAU) — its term for the number of daily users who can view ads. Analysts were expecting 196.5 million, according to IBES data from Refinitiv.

Twitter said user growth was driven by product improvements and more global conversation from events like the COVID-19 pandemic and the US election. Some temporary changes to reduce misinformation around the US election had a small negative impact on global user growth, it said.

CEO Jack Dorsey’s social media company has been in the spotlight amid global debates over what is allowed on the site — from its ban on former President Donald Trump to its recent refusal to comply with an Indian government directive to block accounts linked to the farmers’ protest.

In a letter to shareholders, Twitter said the significant pandemic-related surge in users last year created challenges for future gains.

Twitter’s advertising business benefitted from new ad formats and improved targeting, Chief Financial Officer Ned Segal said in the earnings release.

Total revenue came in at a record $1.29 billion, an increase of 28 percent year over year. Ad revenue was $1.15 billion, up 31 percent from the same period a year ago.

Analysts on average were expecting revenue of $1.19 billion, with ad sales totalling $1.05 billion.

Twitter acquired newsletter startup Revue last month. It also recently launched disappearing tweets called “fleets” as a low-pressure way for users to post on the site and said it had in late Q4 released a beta test of “Spaces,” its audio-chat room feature which has similarities with voice-based app Clubhouse.

Net income rose to $222.1 million, or 27 cents per shares, from $118.8 million, or 15 cents per share a year earlier. Excluding items, Twitter earned 38 cents per share, beating estimates of 31 cents.

Twitter’s costs and expenses were $1.04 billion for the quarter, an increase of 21 percent year over year. It said it expected costs and expenses to rise partly due to plans to grow headcount by more than 20 percent particularly in engineering, product, design and research.

Twitter said it expected total revenue in the current quarter to be between $940 million and $1.04 billion, compared to estimates of $965.14 million.