Twitter Inc reported slower-than-expected user growth in the fourth quarter of 2020, with a 27% increase that fell short of Wall Street estimates. The company cautioned that the rate of user growth would decline in the coming quarters as the boost from the COVID-19 pandemic subsides. Nevertheless, Twitter exceeded sales and profit targets for the quarter.

In terms of revenue, Twitter’s ad revenue reached $1.15 billion, marking a 31% increase compared to the same period the previous year. The company projected that total revenue would grow at a faster pace than expenses, which are expected to increase by 25% or more in 2021.

Twitter reported having 192 million average monetizable daily active users (mDAU) in the fourth quarter, slightly lower than the 196.5 million expected by analysts. The company attributed the growth in users to product enhancements and increased global conversation surrounding events like the COVID-19 pandemic and the U.S. election. However, certain temporary measures implemented to combat misinformation during the U.S. election had a slight negative impact on global user growth.

The social media giant has faced scrutiny and controversy regarding its content moderation policies, including its ban on former U.S. President Donald Trump and its resistance to comply with the Indian government’s directive to block accounts linked to the farmers’ protest. Twitter acknowledged in a letter to shareholders that the significant surge in users due to the pandemic presented challenges for future growth.

Twitter’s advertising business benefited from the introduction of new ad formats and improved targeting. The company’s total revenue for the quarter reached a record $1.29 billion, a 28% increase compared to the previous year. Net income also rose to $222.1 million, or 27 cents per share, from $118.8 million, or 15 cents per share, in the same period the previous year. Excluding items, Twitter’s earnings per share were 38 cents, surpassing estimates of 31 cents.

In recent months, Twitter has undertaken strategic moves to expand its offerings. It acquired newsletter startup Revue and introduced new features such as “fleets” (disappearing tweets) and “Spaces” (audio-chat rooms similar to the Clubhouse app). These initiatives aim to provide users with more diverse ways to engage on the platform.

Looking ahead, Twitter anticipates increased costs and expenses, partly due to plans to expand its headcount by more than 20% in areas such as engineering, product, design, and research. The company projects its total revenue for the current quarter to be between $940 million and $1.04 billion, compared to analysts’ estimates of $965.14 million. While user growth may slow down, Twitter remains optimistic about its ability to drive revenue growth and meet the demands of its expanding user base.

Useful links:
1. Source 1
2. Twitter Investor Relations