The Early Reaction To Twitter's Q4 Earnings

Twitter Inc TWTR reported fourth-quarter results which came in better than expected, but the stock fell more than 6 percent as investors appear to be concerned with management's guidance and expense warning.

What Happened

Twitter earned 31 cents per share in the fourth quarter on revenue of $909 million. This represents a top-and-bottom line beat as the Street was expecting the company to earn 25 cents per share on revenue of $868.1 million.

Monthly active users (MAUs) averaged 321 million in the fourth quarter which represents a decrease of 9 million from last year. The company attributed the drop in users to a decision to prioritize the health of the platform and a reduction in the number of e-mail notifications sent to users, among others.

By region, average U.S. MAU in the quarter was down 3 percent from last year to 66 million. International MAU averaged 255 million, down 3 percent from last year.

Average monetizable daily active users -- a new metric the company will report instead of daily active users -- in the quarter rose 9 percent from last year to 126 million.

Why It's Important

Twitter's 24 percent year-over-year revenue increase (26 percent on constant currency basis) makes it clear the company is able to show revenue growth despite a declining user base, according to eMarketer Senior Analyst Jasmine Enberg. Management's decision to prioritize the health of its platform is part of its commitment to remove "questionable accounts."

Meanwhile, the uptick in users who use Twitter's platform at least once a day is an encouraging sign for advertisers, Enberg said. This implies users remain highly engaged on the social media platform and suggests plenty of room for growth as DAUs make up under half of MAUs.

Looking forward to the first quarter, Twitter expects revenue to be $715 million to $775 million which is short of the $764.9 million the Street expected. The company said cash operating expenses will rise 20 percent throughout 2019 to better improve the "health, conversation, revenue product and sales, and platform."

Shares traded around $32.05, down 6.2 percent Thursday morning.

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