Twitter Announces 2020 Q4 Earnings

Social media giant Twitter (TWTR) has released its 2020 fourth quarter earnings, revealing that Wall Street earnings expectations were exceeded during the period while the number of daily users was less than analysts were projecting.

The social networking firm reported 192 million monetizable daily active users worldwide for Q4, signaling an increase of 5 million from Q3 and a rise of 40 million from the year-earlier period. In the US, Twitter claimed that it had 37 million monetizable active users in Q4, an increase of around 1 million from the previous quarter.

“We are a platform that is obviously much larger than any one topic or any one account,” CEO Jack Dorsey said at the company’s earning call. Later in the call, he added, “We have a global service. We are also not dependent upon just news and politics being what drives [usage on] Twitter.”

Twitter’s revenue for the final quarter of a turbulent year for all totaled $1.29 billion, an increase of 28% year over year. The social media site, launched in 2006, posted net income of $222 million, representing diluted earnings per share of 27 cents.

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On average, Wall Street analysts expected Twitter to gain 9 million daily active users in the quarter, with consensus estimates of $1.19 billion in revenue and EPS of 16 cents.

“I’m really proud of how we navigated 2020 and our remarkable finish in Q4. We reported revenue of $1.3 billion, up 20% year-over-year, reflecting great progress across both brand and direct response, with 31% year-over-year growth in total ad revenue, and greater than 50% year-over-year growth in MAP revenue in Q4,” Dorsey said during the earnings call.

“We made significant progress with new ad formats, stronger attribution, and improved targeting in Q4. And that momentum continues in Q1, with the launch of our rebuilt MAP offering and website clicks objective.

“These improvements allow us to serve DR advertisers of all sizes with better performance, and puts us in a much stronger position to drive accelerating revenue growth in 2021 and beyond. Average monetizable DAU reached $192 million in Q4, up 27% year-over-year, with growth from product improvements reaching an all-time high in 2020.”

Dorsey and colleagues also took the time to look to the future during the earnings call, claiming that they expected revenue to grow faster than expenses in 2021, assuming the situation surrounding the pandemic continues to improve.

Also taken into account for that estimate was the ‘modest impact’ that Apple’s upcoming privacy changes to iOS 14 will have on operations.

The company also warned that it expects headcount growth of more than 20% over the next 12 months, while they have forecast overall expenses to increase by more than 25%.

For the first quarter of 2021, Twitter said it expects total revenue to be between $940 million and $1.04 billion, with operating income estimates settling at between a loss of $50 million and break even. Wall Street analysts have forecast revenue of around $965 million for the same period.

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During the earnings call, Dorsey and his colleagues also spoke of the US election and the role that Twitter played in it. The company said that in the months leading up to the election, it added labels, warnings and ‘prebunks’ on tweets that were potentially misleading.

The firm also made changes that were intended to ‘increase context and encourage more thoughtful consideration’, including encouraging the use of quote tweets and removing tweet recommendations, but these were soon continued after the company found that they were not effective.

Looking ahead, we have a strong product roadmap designed to deliver even more daily utility for new and existing customers. I’m also proud of the work we did in Q4 and over the course of the year to protect the integrity of the conversation around the US elections, scale our infrastructure and service to operate reliability throughout the major events of 2020, and grow our team while keeping people safe in the face of a global pandemic,” Dorsey continued at the earnings call.

“Given the more stable business backdrop, we were able to move faster in hiring resulting in total expense growth for Q4 of 21% and CapEx growth of 95% year-over-year. As a result of our strong revenue performance, we reported our highest ever quarterly operating income of $252 million, a reminder of the leverage in our business when we deliver revenue strength like we did in Q4,” he said.

“I look forward to seeing you all at our Virtual Analyst Day on February 25th, where we’re going to go deeper on all of our plans. And lastly, I want to thank our teams for their incredible resilience and dedication during these trying times. We continue to see the strength and value of our service, the incredible potential of our business, and the importance of our purpose to serve the public conversation.”

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