Twitter sales are up, stocks are up 11 percent


NEW YORK (Reuters) – Twitter Inc slightly outperformed Wall Street sales and earnings estimates on Thursday, elevating the stock by 11 percent before the opening bell, as higher ad sales offset a decline in monthly users.

People holding cell phones are silhouetted against a background taken in with the Twitter logo in this illustration picture taken in Warsaw on September 27, 2013. REUTERS / Kacper Pempel / Illustration / File-Foto

Quarterly ad revenue increased 29 percent year over year to $ 650 million. This was supported by ad sales by media companies such as Live Nation Entertainment, Major League Baseball and Major League Soccer.

This contributed to a similar $ 758 million increase in total revenue over the prior year and, according to the Refinitive data, exceeded analysts' average estimate of $ 702.6 million. The company reported adjusted profit of 21 cents per share, well above the average estimate of 14 cents.

The company downplayed an unexpectedly sharp decline in monthly active users, declaring that it focuses on removing accounts for disinformation, hate speech and other abuses to create a base of high-quality users that are attractive to advertisers.

Twitter has deleted millions of suspicious accounts after it and other social media services have been used in misinformation campaigns that seek to influence voters in the 2016 US presidential election and other elections. Last week it revealed it had removed about 10 million tweets that it thought were the work of Russian and Iranian government-sponsored influence operations.

Twitter said in a conference call on Thursday that the cleanup campaign it launched in March and calls a "health" initiative will allow revenue to grow faster than users for a sustained period.

"Health is ultimately a growth driver for service, and we believe that this is important not only for the overall experience, but also for Twitter's long-term viability," said Chief Executive Jack Dorsey during the call.

An illustration image shows the Twitter logo being reflected in the eye of a woman in Berlin, on November 7, 2013. REUTERS / Fabrizio Bensch / illustration / file photo

USER DROP

The number of monthly active users dropped to 326 million in the third quarter, which is below the average analyst forecast of 331.5 million, according to FactSet. Twitter said it expects to fall below $ 326 million in the current quarter, with an average forecast of $ 333.4 million missing.

While Twitter shares slumped 19 percent after a similar decline in the final quarter, better-than-expected third-quarter revenues and earnings were a source of concern.

"If they get rid of bots, bad accounts and fight against hate speech, then it's actually good for the overall health of the platform," said analyst Brian Wieser of the Pivotal Research Group. "This is certainly more attractive for advertisers."

These concerns were somewhat offset by increased video ad sales, suggesting that the company is successfully trying to generate more money from each user, and investors are looking for solid evidence that would lead to sustainable revenue and earnings growth.

"Twitter continues to do a lot, little." User growth is lackluster, but the company is gaining more from the current users, "said Jim Cridlin, global innovation leader at WPP's media buying agency Mindshare.

Sales agreements with Major League Baseball, video game publisher Activision, Sony Music and Vice are beginning to attract advertisers to Twitter's live premium video, he said.

Twitter said its daily active users were up 9 percent from a year earlier, weaker than an 11 percent advance in the previous quarter and the slowest growth rate in two years. The company does not announce the total number of daily users.

Reporting by Angela Moon and Munsif Vengattil; Cut by Jim Finkle and Patrick Graham

Our standards:The Thomson Reuters Trust Principles.

,