What happened
Shares of Twitter (TWTR +0.00%) popped 22.1% last month, according to data provided by S&P Global Market Intelligence, after the microblogging specialist reported better-than-expected third-quarter results.
So what
Twitter's revenue surged 29% to $758 million despite a 9 million decline in monthly active users, to 326 million. The company continues to make progress with its plans to reduce inactive and malicious accounts in order to better combat spam, harassment, and misinformation.
Advertisers appear to be embracing the changes. Ad revenue leapt 29%, with ad engagements increasing 50%.
Moreover, as my colleague Daniel Sparks explains, a 9% increase in daily active users is evidence of how improving the quality of its user base is benefiting Twitter's business.
All told, Twitter's third-quarter adjusted (non-GAAP) net income soared 109% to $163 million, or $0.21 per share.
Twitter dialed up its profit growth in the third quarter. Image source: Getty Images.
Now what
By reining in spending -- costs and expenses increased only 14% year over year in the third quarter -- Twitter seems to have turned its focus toward profit growth, rather than user growth. Wall Street analysts and investors alike have cheered the move. And with analysts projecting that Twitter will grow its earnings by more than 43% annually over the next five years, the stock's current valuation of about 36 times forward earnings seems like a fair price to pay for the social media leader.
