Twitter investors look past warning of slower user growth and eye rising ad sales

FILE PHOTO: The Twitter application is seen on a phone screen August 3, 2017. REUTERS/Thomas White/File Photo

(Reuters) – Twitter Inc on Tuesday beat Wall Street targets for quarterly sales and profit and followed its social media peers to forecast a strong start to 2021 as ad spending rebounds from a rock bottom.

The solid beat, aided by ad product improvements, convinced investors to overlook a dull forecast for user growth, which Twitter expect to slow down to low double digits this year as a boost from the pandemic fizzles.

Total revenue came in at a record $1.29 billion, an increase of 28% year over year. Shares of the company were up nearly 3% in extended trading, adding to a 11% gain in stock so far this year.

The social media company said expenses would rise 25% or more in 2021 but projected that total revenue would grow faster than costs.

The social media company has been in the spotlight amid global debates over what is allowed on the site – from its recent refusal to comply with an Indian government directive to block accounts linked to the farmers’ protest to its ban on former U.S. President Donald Trump following the Capitol riot in January.

On an earnings call with analysts, CEO Jack Dorsey downplayed any impact from the much-debated January account closures.

“We are a platform that is obviously much larger than any one topic or any one account. 80% of our audience is outside the United States,” he said.

Investors are looking past Twitter’s miss on user growth because of other positives during the quarter, including higher ad revenue, profitability and revenue guidance that was better than expected, said Hari Srinivasan, senior research analyst at Neuberger Berman.

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. That’s up 26% from a year earlier. Analysts were expecting 196.5 million, according to IBES data from Refinitiv. Twitter said that user growth rates may decrease to “low double digits” beginning in the second quarter.