Even as Twitter (NYSE:TWTR) continued to take the axe to what it's calling "spammy and suspicious" accounts, the social network's year-over-year revenue growth rate accelerated in Q3. Net income similarly improved, highlighting how Twitter is morphing into a tech company that can consistently post meaningful profits. The company's strong momentum was driven by improved health of the conversations on Twitter and increased value for advertisers.

Here's a closer look at the key metrics and developments driving the company's recent success.

A businessman using a smartphone.

Image source: Getty Images.

Twitter's third-quarter results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Change

Revenue

$758 million

$590 million

29%

Non-GAAP EPS

$0.21

$0.10

110%

Monthly active users

326 million

$330 million

(1.2%)

Data source: Twitter's third-quarter earnings release. Table by author. GAAP = generally accepted accounting principles. EPS = earnings per share.

What happened with Twitter this quarter?

  • Revenue and non-GAAP earnings per share jumped 29% and 110%, respectively.
  • This was Twitter's fourth consecutive quarter of GAAP profitability.
  • Continued efforts to clean up bad accounts led to a 9 million sequential decrease in monthly active users.
  • Daily active users increased 9% year over year.
  • Ad engagements rose 50% year over year.
  • Cost per engagement (CPE), or the amount advertisers pay Twitter on average per engagement, declined 14% year over year.
  • Advertising revenue increased 29% year over year, to $650 million.
  • Data licensing and other revenue rose 25% year over year, to $108 million.

What management had to say

Twitter made significant progress across its priorities, which management says include the platform's overall health, audience and engagement growth, revenue product, ads platform, and sales. 

Sure, Twitter's monthly active users declined, but management reminded investors in its third-quarter shareholder letter that "[daily active user] growth continues to be the best measure of our success in driving the use of Twitter as a daily utility." In addition, Twitter noted that five of its top 10 geographic markets saw double-digit year-over-year growth in daily active users, "demonstrating another quarter of broad-based growth."

Though improved health of the conversations on Twitter likely helped contribute to some of the company's growth, the quarter's primary driver was the social network's execution on its ad business. According to management, "Value for advertisers continued to improve in Q3, driven by ongoing ad engagement growth, improved product features, better ad relevance (as measured by clickthrough rates (CTR) and ad engagements), and better pricing."

Looking ahead

Twitter seems to expect more strong momentum in Q4. "As we look ahead to the remainder of the year, we remain optimistic about our ability to execute on our priorities and deliver increasing value for advertisers on our platform," management said in Twitter's third-quarter shareholder letter.

In addition, as the company continues to double down on improving the health of conversations on Twitter by removing bad accounts, management expects its monthly active users to decline by mid-single-digit millions sequentially.

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.