Early Wednesday morning, Chinese social media giant Weibo (NASDAQ:WB) reported results for the first quarter of 2018. Despite a $10 million revenue headwind related to changes in GAAP accounting policies, the company posted a 76% year-over-year sales jump while earnings more than doubled.

Let's take a closer look at Weibo's results.

Weibo's first-quarter results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Net revenues

$350 million

$199 million

76%

Net income attributable to Weibo

$99.1 million

$46.9 million

111%

GAAP EPS (diluted)

$0.44

$0.21

110%

Data source: Weibo.

What happened with Weibo this quarter?

  • Weibo added 19 million monthly active users (MAU) during the quarter to land at 411 million moderately active accounts. Of those users, 93% signed on from a mobile device, up from 90% in the year-ago quarter.
  • Three months ago, management set their first-quarter revenue guidance at $340 million. Weibo exceeded that target by $10 million, despite the adoption of new accounting rules for revenue recognition. Under the old framework, Weibo would have reported top-line sales of $360 million.
  • The largest advertiser on Weibo's social media platforms is only growing in stature. E-commerce giant Alibaba (NYSE:BABA) more than tripled its Weibo ad spending in the first quarter while revenues from other advertisers rose 71% higher. Alibaba accounted for 8.7% of Weibo's ad sales, up from 4.6% in the first quarter of 2017.
Weibo's logo, which features a stylized cartoon bird sending sound waves from its tiny beak.

Image source: Weibo.

What management had to say

"We continue to see great momentum in our business with advertising and marketing revenue growing 79% year over year in the first quarter," said Weibo CEO Gaofei Wang in a prepared statement. "With ad budget shifting toward mobile, social and video, we are seeing our revenues benefiting from this secular trend."

Looking ahead

For the second quarter, Weibo expects to record revenues of roughly $425 million. Hitting that target on the nose would amount to a 68% year-over-year jump, and the forecast was prepared under the new accounting rules that moves collected sales tax payments out of the top-line revenue calculation. That's how GAAP revenue accounting will work from now on and it's a detail you should consider when doing year-over-year comparisons for the next three quarters. As a rule of thumb, it looks like you could subtract roughly $10 million from the revenues that were collected in each quarter of 2017.

Beyond that, Weibo's business remains an exclusively Chinese affair. The company has barely started thinking about expanding abroad but has a long way to go. Roughly 50 million people of Chinese descent reside outside of China today and Weibo's popular social media tools could perhaps find new audiences through translation. For now, this is not a high-priority strategy.

Anders Bylund owns shares of Alibaba Group Holding. The Motley Fool recommends Weibo. The Motley Fool has a disclosure policy.