It was a fabulous quarter for Twitter, doubling earnings and send share prices up sharply in after-hours trading, but some concerns remained on the horizon as the online giant continues to report challenges in attracting new users.
The company said Q4 revenues were $479 million, almost double the same period last year and 6 percent above analyst expectations of $453 million. Adjusted earnings per share also doubled the Street’s consensus expectations, coming in at 12 cents a share.
The company’s bigger challenge on the day was explaining away anemic growth in its new users. Initially, the company said new customer growth was up only 1 percent for the quarter, about 4 million new users among its 288 million active users every month.
That fed into long-running concerns about the company’s ability to grow beyond its hard-core user base, which has sustained it for so long, but which also has built up a somewhat impenetrable argot that makes it difficult for newcomers to join the conversation.
The Street seemed more than mollified, however, when Twitter clarified that part of its numbers problem for the quarter was a bug in Apple’s iOS 8 mobile software. The bug cost Twitter 4 million users on the quarter.
With that clarification, after-hours trading jumped share prices as much as $5 before settling in at more than $3 above its $41.86 close.
Buyers had other reasons for optimism. Twitter CEO Dick Costolo confirmed a previously reported deal with Google to have pertinent tweets appear in the search giant’s results. That could significantly increase awareness and use of the site.
New “instant timelines” in those search results should make it easier for especially new users to track conversations about breaking news and topics. Those timelines can also include advertising and promoted tweets, both revenue generators.
“We’ve got the opportunity now to drive a lot of attention, to aggregate eyeballs, if you will, to these logged out experiences, topics and events that we plan on delivering on the front page of Twitter,” Costolo said during the day’s analyst call. “And that’s one of the reasons this makes a lot more sense for us now.”
More importantly, the deal with Google has fueled speculation that it may lead to a more complete partnership, with the search giant buying Twitter. At least some analysts question whether Twitter is broadly enough configured to sustain growth long-term in the ways that, say, Facebook has been able to do.
In perhaps partial response to those concerns, Twitter also has just rolled out a series of other new capabilities, including a native video player that will run 30-second videos inside the program and a new group chat function that will allow a set of users to simultaneously and private talk to each other. So-called Direct Messages previously were restricted to just one-to-one messages. Both video and group chat should significantly expand the site’s functionality.