Twitter beat Wall Street earnings expectations for the fourth quarter of 2020 and netted a gain of 5 million daily users — less than analysts were projecting — to close out a tumultuous year.
The social-networking company reported 192 million monetizable daily active users worldwide for Q4. That’s up from 187 million in Q3 and 152 million in the year-earlier period. In the U.S., Twitter said it had 37 million monetizable daily active users in Q4, up 1 million from the previous quarter.
In early January, Twitter banned former President Donald Trump — one of Twitter’s most prolific and problematic power users. Even so, Twitter expects healthy user growth in the current quarter. The company projected that it will see year-over-year daily user growth of 20% in Q1, implying a net gain of 7 million DAUs worldwide sequentially to more than 199 million. Twitter noted the increase in average absolute monetizable DAU through the end of January was “above the historical average from the last four years.”
Twitter CEO Jack Dorsey, on the Q4 earnings call, pointed out that 80% of the platform’s audience is outside the U.S. and that it has more than 50 accounts with over 25 million followers.
“We are a platform that is obviously much larger than any one topic or any one account,” Dorsey said. Later in the call, he added, “We have a global service. We are also not dependent upon just news and politics being what drives [usage on] Twitter.”
Q4 revenue totaled $1.29 billion, an increase of 28% year over year, and Twitter posted net income of $222 million, representing diluted earnings per share of 27 cents. Wall Street analysts on average expected Twitter to gain 9 million daily active users in the quarter, with consensus estimates of $1.19 billion in revenue and EPS of 16 cents.
For Q1 2021, Twitter said it expects total revenue to be between $940 million and $1.04 billion, and operating income to be between a loss of $50 million and break even. For Q1 2021, Wall Street analysts had been forecasting revenue of about $965 million.
The company said that in the months leading up to the U.S. election it added labels, warnings and “prebunks” on potentially misleading tweets. Twitter also made changes intended to “increase context and encourage more thoughtful consideration” — including encouraging use of quote tweets and removing tweet recommendations in the Home timeline — but discontinued those because the company found they weren’t effective.
In aggregate, the discontinued changes had “a small but measurable negative impact” on global daily active users in Q4, which “was as expected and well worth the effort to protect the integrity of the conversation around the election period in the U.S.,” Twitter said.
For the full year, Twitter expects to grow headcount by more than 20% and forecast total costs and expenses to grow 25% or more. Twitter said that it expects total revenue to grow faster than expenses in 2021, assuming an ongoing abatement of the impact of the COVID pandemic and that it will see only a “modest impact” from Apple’s change with iOS 14 to require user opt-in for ad tracking.
Q4 was the last quarterly period that Trump was still on the platform. Trump, who last had more than 88 million followers, was permanently banned by Twitter on Jan. 8 after the deadly attack on the U.S. Capitol by pro-Trump rioters and Trump’s tweets that the company said violated its ban on inciting violence.
Some analysts have expected Twitter to suffer a slowdown in user growth with the banishing of Trump and certain pro-Trump users who have run afoul of its policies prohibiting misinformation. In a research note ahead of the results, Wedbush Securities analyst Michael Pachter predicted a slowdown in user growth in Q4, citing Twitter’s purge of QAnon accounts among factors that “may have triggered defections by more ardent Trump supporters, offsetting any growth that occurred during the quarter.”
Meanwhile, Twitter said that in Q4 it made “significant progress” on its brand and direct-response advertising products. In addition, ahead of this week’s relaunch of the Mobile Application Promotion ad product — a suite of products that lets advertisers promote mobile apps and installs — MAP revenue rose more than 50% year-over-year in the fourth quarter (but was flat for the full year).
Twitter also touted its recent multiyear global video content deal with NBCUniversal, which expands on their previous pact to include key events such as the Golden Globes, Latin American Music Awards, the E! People’s Choice Awards, and the Macy’s Thanksgiving Day Parade, as well as sports content from NBC Sports, Telemundo Deportes, Sky Sports and Golf Channel.