One of the important items to watch in Twitter's (NYSE:TWTR) fourth-quarter earnings report was whether the social media company would post its first profit ever. Twitter delivered -- and then some. Not only did Twitter report a quarterly profit, it surprisingly returned to revenue growth as well.

The quarter featured a host of other promising trends, including strong growth in data licensing, adverting engagement, daily active users, and more.

A person using their smartphone in the back of a car.

Image source: Getty Images.

The raw numbers

Metric

Q4 2017

Q4 2016

Change

Revenue

$732 million

$717 million

2%

Non-GAAP EPS

$0.19

$0.11

73%

GAAP EPS

$0.12

($0.23)

N/A

Data source: Twitter fourth-quarter shareholder letter. Table by author.

Going into Twitter's fourth quarter, Twitter management said it expected fourth-quarter adjusted earnings before interest, taxes, and depreciation (EBITDA) to be between $220 million and $240 million. The high end of this range, management noted, would make the company profitable for the first time on a GAAP basis.

But Twitter over-delivered on its promise, reporting adjusted EBITDA of $308 million. That meant the company reported a GAAP net profit of $91 million for the quarter, translating to GAAP earnings per share of $0.12, up significantly from a per share loss of $0.23 in the year-ago quarter. On a non-GAAP basis, EPS was $0.19, up from $0.11 in the year-ago quarter.

Twitter's surprising earnings growth was helped by its higher-than-expected revenue growth. Fourth-quarter revenue was $732 million, up 2% from $717 million in the year-ago quarter. This revenue growth contrasted starkly from Twitter's 4% and 5% year-over-year revenue declines in its third and fourth quarters of 2017, respectively.

Fourth-quarter highlights

  • Twitter's advertising revenue was $644 million, up 1% year over year.
  • Owned-and-operated advertising revenue, however, jumped 7% year over year. This growth reflected "better-than-expected growth across all major products and geographies," Twitter said in a letter to shareholders.
  • Ad engagements were up 75% year over year, driven by a mix shift toward video ads and higher click-through rates.
  • When excluding revenue from Twitter's direct response advertising product, TellApart, from year-over-year comparisons (TellApart was fully deprecated for the length of Q4 2017), consolidated revenue was up 8% year over year.
  • Twitter's adjusted EBITDA margins hit 42% -- within Twitter's long-term target range of 40% to 45% for the first time.
  • Data licensing and other revenue was $87 million, up 10% year over year.
  • Daily active users were up 12% year over year, marking Twitter's fifth quarter in a row of double-digit growth in the key metric.
  • Monthly active users were 330 million, flat sequentially but up 4% year over year.

Twitter justified its flat monthly active user growth:

As expected, MAU was impacted by seasonality and the change to Safari's third-party app integration, which affected approximately 2 million MAU in Q4 (roughly 1 million in the US and 1 million in international markets), as well as increased information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts.

A group of people standing against a white wall using smartphones, tablets, and laptops.

Image source: Getty Images.

Looking ahead

For Twitter's first quarter, management said it expects adjusted EBITDA of $185 million to $205 million and an adjusted EBITDA margin between 33% and 34%. Highlighting Twitter's expectations for its momentum to continue, this guidance compares to adjusted EBITDA of $170 million and an adjusted EBITDA margin of 31% in the year-ago quarter.

Twitter said it will focus on three key priorities during the year:

  1. Improving its core ad offerings through better performance and measurement.
  2. Expanding to new channels of demand for its ad products.
  3. Continuing to increase its data and enterprise solutions revenue.

Importantly, management also said it expects to be GAAP profitable for the full year.

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.