Twitter Shares Boosted After New Flock Of Users Help Beat Q2 Revenue Expectations

Topline: Twitter shares were up 9.5% after second-quarter earnings beat expectations, with the company reporting an 18% rise in revenue to $841 million on the previous year and a 21% increase in advertising revenue. The results are a sign a controversial redesign and attempts to crackdown on abusive behavior may be paying off.

• The strong results also show a 14% rise in monetizable daily active users (mDAUs) to 139 million. Investors have been tracking the figure closely over concerns about the social network’s shrinking user base.
• The California-based firm reported a $1.1 billion second-quarter net profit on last year, thanks to a $1 billion tax benefit related to corporate restructuring. This is up from $191 million in the first quarter.
• Analysts had expected revenue of $839.3 million, and 135.4 mDAUs. The company attributed its growth in mDAUs to “organic growth, product improvement and marketing.”
• CEO Jack Dorsey said of the results: “Health remains our top priority and we are proud of the work we did in the second quarter. Our focus was on ensuring that our rules, and how we enforce them, are easy to understand.”
• The company reported an 18% fall in "reports of spammy or suspicious behavior across all Tweet detail pages," which show the replies to tweets. It added: "We will continue working to proactively reduce abuse on Twitter, with the goal of reducing the burden on victims of abuse and, increasingly, taking action before abuse is reported."
• Twitter’s data licensing arm also pulled in $114 million in revenue in Q2.
• It comes as Twitter rolled out a new desktop interface this month, to mixed reviews. The move is a bid to make Twitter easier to use and draw in new users. The more users that can signed up and be served ads, the more money the social network makes.

Key background: Twitter replaced its old audience engagement metric with the “monetizable daily active users” after the first quarter. The company defines them as users “who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com or Twitter applications that are able to show ads,” i.e., those users exposed to ads. Previous metrics, such as the monthly or daily active users, did not show which users were exposed to ads and which were not. Advertising revenue accounts for 86% of Twitter’s income.

What to watch out for: Twitter is expecting lower revenue in the third quarter, between $815 million and $875 million, as a result of older advertising formats being retired.