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Twitter Earnings: Mark Your Calendar

Daniel Sparks, The Motley Fool

For the most part, 2018 was a good year for Twitter's (NYSE: TWTR) business. Sure, monthly active users turned downward in Q2 and Q3. But this was due to the company's aggressive (and important) efforts to improve the health of its platform. In addition, Twitter's year-over-year revenue growth rates accelerated as the year went on.

But there's still one more quarter from 2018 for Twitter to report. The company will release its fourth-quarter update on Feb. 7. Following a period of accelerating revenue growth and four consecutive quarters of GAAP profitability, expectations are high. Can Twitter deliver?

Here's a preview of some key items to watch when Twitter reports fourth-quarter results.

A young women looking at her smartphone.

Image source: Getty Images.

Revenue

Twitter's top-line growth has been impressive recently. Third-quarter revenue increased 29% year over year -- an acceleration from 24% revenue growth in Q2. This momentum has been driven by broad-based growth across Twitter's various ad products and geographies.

Though management didn't provide a forecast for its fourth-quarter revenue, Twitter CFO Ned Segal sounded confident during the company's third-quarter earnings call, noting that the company feels "really good about the momentum that we've got going into the seasonally strong fourth quarter."

Analysts, on average, are expecting Twitter to report fourth-quarter revenue of about $870 million, representing 18.9% year-over-year growth.

Profitability

With four quarters in a row of GAAP profitability behind it, Twitter has morphed into a reliably profitable company. Net income in the company's third quarter was $789 million, or $106 million when excluding a one-time net tax benefit recorded during the period. This compares to a loss of $21 million in the year-ago quarter. Non-GAAP net income in Q3 was $163 million, up from $78 million in the year-ago quarter. The company's third-quarter non-GAAP profit translates to non-GAAP earnings per share of $0.21.

On average, analysts are currently expecting Twitter to report non-GAAP earnings per share of $0.25 in Q4. This compares to non-GAAP EPS of $0.19 in the year-ago quarter.

Users

Twitter's user trends will likely see extra scrutiny when the company releases its fourth-quarter results. In Q2, Twitter's monthly active users declined by 1 million sequentially. This decline worsened in Q3, when monthly active users fell by 9 million sequentially.

Some of the key factors that drove this decline in Twitter's monthly active users were the enactment of the General Data Protection Regulation (GDPR) in the European Union and greater prioritization of platform health by removing spammy and suspicious accounts.

Twitter expects its monthly active users to decline further in Q4, as these factors continue to weigh on the metric.

Impressively, Twitter's daily active user growth remained strong in Q3. Daily active users increased 9% year over year, helped by double-digit growth in five of the company's top 10 global markets. Investors should look for similarly strong growth in Twitter's daily active users in Q4.

Twitter reports its fourth-quarter results before market open on Feb. 7.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.