Please ensure Javascript is enabled for purposes of website accessibility

Twitter, Inc. Earnings: 3 Metrics to Watch

By Daniel Sparks – Feb 1, 2016 at 5:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Can the social specialist soothe investor concern about the company's slowing user growth when it reports results?

Social-networking company Twitter (TWTR -0.81%) reports fourth-quarter results next Wednesday, but don't expect the company to live up to Facebook's (META -2.64%) recent expectation-crushing quarter that sent shares soaring about 15% the following trading day. A recent exodus of key executives may signal a shaky start to the company's plans to reinvigorate its slowing user growth.

Twitter headquarters. Image source: Twitter.

Twitter's earnings release comes at an important time. With Twitter co-founder Jack Dorsey returning as CEO late last year, investors are hoping the returning visionary can help the company in its struggle to transform itself into a platform that appeals to a wider audience. Investors will get a glimpse into whether or not Dorsey's return, so far, is improving user growth when Twitter reports results next week. Here are three key metrics to watch when the company announces fourth-quarter earnings.

Revenue: Analysts, on average, are expecting Twitter to report revenue of about $710 million for its fourth quarter. This would represent 48% growth compared to the year-ago quarter.

These expectations seem both realistic and conservative, considering that Twitter guided for revenue of $695 million to $710 million for the quarter and the company has a history of conservative guidance.

Advertising revenue growth: Investors will likely pay particularly close attention to the company's year-over-year growth in advertising for the quarter, as Facebook set a huge precedent for Twitter when the larger social network reported results last week.

Facebook's advertising revenue for Q4 increased 57% from the year-ago quarter. While the growth rate itself was impressive, what was most notable was the extent of the acceleration in this growth rate compared to Q3. Facebook's advertising revenue in the prior quarter increased a still-impressive, albeit notably slower, 45% over the year-ago quarter.

Facebook video ads. Image source: Facebook.

Can Twitter, too, impress when it comes to advertising revenue growth?

Twitter's advertising revenue grew by 60% compared to the year-ago quarter. Given the high level of this recent growth, it's probably not realistic to expect the company to maintain this same rate for Q4, but investors should at least look for year-over-year growth in advertising revenue in excess of 50%

Users: Twitter's monthly active user count, of course, will be one of the main focuses when Twitter reports results. Following Twitter's unimpressive 1% sequential growth in monthly active users in Q3, expectations aren't very high.

But investors may be hoping for a slight improvement in the sequential user growth rate.

The company's launch of its Moments product, a Twitter feature that is supposed to help users discover trending content, was supposed to be one of Twitter's first big moves to begin to transform the service into one that appeals to a mass-market audience. And Twitter launched this product in early October, with more than half of the quarter left.

For Twitter to report sequential growth in monthly active users of 1% to 2% in Q4, the company would need to report around 323 million to 326 million monthly active users.

Stay tuned at The Motley Fool for more coverage of Twitter stock ahead of earnings next week, as well as for a Foolish look at the company's fourth-quarter performance after the numbers are made public on Wednesday.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
$48.99 (-0.81%) $0.40
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$135.40 (-2.64%) $-3.67

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.