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Twitter Earnings: Can Strong Revenue Growth Persist?

Daniel Sparks, The Motley Fool

Twitter's (NYSE: TWTR) declining revenue during a portion of 2017 is long forgotten now. Since returning to growth over a year ago, the social network's top-line momentum has been not just solid, but downright impressive. The company's revenue for the full year of 2018 was $3 billion, up from $2.4 billion in 2017. 

When Twitter announces its first quarter-quarter results before the market opens on April 23, investors will get to see whether the company has kept up its strong revenue growth. Chances are, it has.

A woman looking at her smartphone

Image source: Getty Images.

Momentum

Twitter's fourth quarter of 2018 was solid around. Revenue rose 24% year over year and non-GAAP net income increased from $141 million in the year-ago period to $244 million. To be fair, however, $42 million of the company's $103 million increase in non-GAAP net income was attributable to a benefit from tax legislation.

Twitter's 24% revenue growth (26% in constant currency) was one of the highlights of the company's fourth-quarter results, putting pressure on for the social network to maintain top-line momentum in Q1. While some deceleration from this high growth rate in Q4 would be natural, any deceleration is likely to be moderate. In the company's fourth-quarter shareholder letter, management implied its growth is broad-based. Specifically, management credited Twitter's fourth-quarter revenue growth to "better-than-expected performance across most products and geographies."

Still, there are no guarantees Twitter's revenue continued rising sharply in Q1 -- and management's guidance certainly doesn't help. In its fourth-quarter shareholder letter, Twitter guided for first-quarter revenue to rise at a rate anywhere between 8% and 17% year over year. Analysts, however, seem to think the midpoint of this guidance range represents a lowball forecast; on average, they expect revenue to come in at the high end of management's guidance range -- at $775 million.

Looking beyond revenue growth

Of course, revenue growth isn't the only important metric worth checking on when Twitter reports first-quarter results. User metrics, too, will be worth looking over.

In Twitter's fourth quarter, monthly active users declined by 9 million year over year and 5 million sequentially as the company continued to crack down on suspicious and spammy accounts and reduced the number of email notifications sent to registered users. The company's daily active users, however, continued to climb higher at a healthy rate of 9% year over year, in line with year-over-year growth seen for the metric in its third quarter of 2018.

In the company's first quarter of 2019. Similar trends from monthly and daily active users are likely. As management continues to prioritize the health of its platform, monthly active users will likely take a hit. But daily active users should continue increasing due to product improvements.

Twitter will report its first-quarter results before market open on Tuesday, April 23.

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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.