A glance at the big sell-off of Twitter (NYSE:TWTR) shares on Friday after the social network posted its second-quarter results may lead some investors to believe the company's financial results were underwhelming. But that was far from the case. Revenue growth accelerated as net income swung from a significant loss in the year-ago quarter to a $100 million profit in Q2.

It was Twitter's user metrics for the quarter that likely worried some investors. Monthly active users fell by 1 million sequentially as the company rolled out efforts to clean up bad accounts.

Here's what investors should know.

A person dressed in a suit holding a smartphone.

Image source: Getty Images.

Twitter's second-quarter results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$711 million

$574 million

24%

Net income

$100 million

($116 million)

N/A

Non-GAAP EPS

$0.17

$0.08

113%

Data source: Twitter second-quarter earnings release. Table by author.

What happened with Twitter this quarter?

  • Highlighting Twitter's momentum, revenue increased 24% year over year and 7% sequentially.
  • Advertising revenue was $601 million, up 23% year over year.
  • Data licensing revenue increased 29% year over year to $109 million.
  • Net income was $100 million, which was a swing from a loss of $116 million in the year-ago quarter.
  • Twitter's net margin improved from negative 20% in the year-ago quarter to positive 14%.
  • Monthly active users were 335 million -- up 9 million from the year-ago quarter but down 1 million sequentially.
  • Daily active users increased 11% year over year, marking the seventh quarter in a row of double-digit growth.

What management had to say

Management was happy with the company's progress in its second quarter, citing Twitter's healthy daily active user growth and its execution with delivering value for advertisers. 

In its second-quarter press release, Twitter CFO Ned Segal added, "We're maintaining profitability while we make investments in the business, achieving strong revenue growth and introducing product updates that make Twitter both healthier and easier to use."

Regarding Twitter's decline in monthly active users, management said in its second-quarter shareholder letter that the pullback was primarily due to management's decision to "prioritize the long-term health of the platform over near-term metrics" -- an initiative that included removing "spammy and suspicious accounts."

Management also importantly noted that video ads remain a key catalyst for ad revenue growth. "Video ads continue to account for more than half of ad revenue and remained our fastest-growing ad format in Q2," management said.

Looking forward

Segal said the company was "optimistic" about Twitter's ability to continue delivering value for advertisers and shareholders. But management noted investors shouldn't expect Twitter's trend of declining monthly active users to reverse yet.

"Based on our current level of visibility, we expect the decline to be mid-single-digit millions of [monthly active users]," management said in Twitter's second-quarter shareholder letter.

Importantly, however, management implied investors shouldn't fret about the metric: "As a reminder, [daily active user] growth continues to be the best measure of our success in driving the use of Twitter as a daily utility."

Management said it expects to remain profitable on a GAAP basis throughout the rest of 2018.

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.