Twitter’s changes to make the social net easier to use — and efforts to clean up the platform by curbing spam, harassment and other malicious activity — appear to working as CEO Jack Dorsey expected: Twitter grew its daily user base in Q2 at its fastest rate in nearly two years, boosted the top line and posted its seventh straight profitable quarter.
In the second quarter of 2019, Twitter’s average monetizable daily active user base was 139 million, up 5 million sequentially and up 14% compared with 122 million in the same period a year ago. In the U.S., the average mDAU was 29 million, compared with 26 million in the same period of the previous year and compared with 28 million in the previous quarter.
Shares of Twitter were up more than 5% in premarket trading Friday — and jumped as much as 11% in regular trading, closing up 8.9% for the day to $41.52 per share (a 52-week high). Twitter’s robust results come after both Facebook and Snap also reported strong gains in the second quarter.
The company reported revenue of $841 million, an increase of 18% year-over-year. Net income was $1.1 billion, which included a significant one-time income-tax benefit. Adjusted net income was $37 million (or 5 cents per share). Twitter beat Wall Street’s revenue forecast but came in under consensus estimates of EPS of 19 cents.
“Health remains our top priority and we are proud of the work we did in Q2. Our focus was on ensuring that our rules, and how we enforce them, are easy to understand,” Dorsey said in announcing the results. He said the company saw an 18% drop in reports of spammy or suspicious behavior across all tweet detail pages in the quarter.
Twitter’s Q2 costs and expenses totaled $766 million, an increase of 21% year-over-year, resulting in operating income of $76 million and 9% operating margin. The company boosted headcount 20% in the quarter, standing at around 4,300 employees as of the end of June. CFO Ned Segal said Twitter anticipates 20% headcount growth for full-year 2019.
Twitter issued third-quarter revenue guidance of $815 million to $875 million (in line with analyst expectations) but noted that sales for the second half of 2019 will decelerate year-over-year in part by the phase-out of certain resource-intensive ad formats. That should benefit Twitter over the long term, as it “refocuses its efforts on more efficient products,” Cowen & Co. analyst John Blackledge wrote in a research note.
Video remains a key strategic push for Twitter. This week, Twitter announced a pact with NBC to distribute an exclusive live show from the 2020 Olympics in Tokyo, along with other content. In Q2, the company announced several new live and on-demand video content partnerships. In addition to expanded renewals with partners such as Viacom, Live Nation, the NFL, ESPN, Bleacher Report, MLS and Activision Blizzard, Twitter announced new partnerships with news media partners including the Wall Street Journal and Time, along with a new partnership with Univision designed to bring even more premium content across sports, news, and entertainment to U.S. Hispanic audiences.
On Twitter’s Q2 earnings call, execs spent a good portion of the time on product improvements designed to make the social network easier to use and more useful — an area critics have called out as a problem for Twitter in the past. That has included work on machine-learning models to provide more relevant content in users’ Home timelines and notifications based on what they’re engaging with “in near real-time,” the company claimed.
Twitter in the second quarter also started experimenting with new ways for people to customize their Home timeline, making it easier to use lists they’ve created or subscribed to. In addition, Twitter has made it easier to follow and join conversations, including showing the original tweet on an author’s profile page when someone is trying to follow a conversation.