April 25, 2018 / 10:55 AM / a month ago

Twitter beats Wall Street estimates as growth moves overseas

April 25 (Reuters) - Twitter Inc reported its second profitable quarter on Wednesday and topped Wall Street estimates for revenue and monthly active users, as advertisers in Asia and other markets outside the United States embraced Twitter’s video ads.

San Francisco-based Twitter has tried to grow its user base and ad business internationally, expanding beyond its home country. U.S. President Donald Trump has kept the service in the headlines domestically but growth has been faster abroad, including a boost in Asia in the most recent quarter.

International sales accounted for 48 percent of revenue, growing 53 percent year-over-year, compared with 2 percent in the United States. Total revenue rose 21 percent.

Still, the social media sector is under intense pressure from lawmakers around the globe for inflaming political debates, allowing abusive language and failing to safeguard personal data.

While there have been few signs that users have abandoned social media, the companies face rising costs in the face of new regulation and to avoid abuse and misuse of their sites.

Twitter said it expected to grow headcount 10 percent to 15 percent in 2018, hiring people to improve the “health” of discussions on Twitter and meet other priorities.

Revenue growth for the remainder of 2018 will be similar to the slower rates of 2016, the company said, adding that second-half growth would face difficult comparisons to a strong performance in late 2017.

Up to Tuesday’s close, Twitter shares had risen 26.9 percent this year, compared with a 1.5 percent decline in the S&P 500 Index.

The fourth quarter of last year was Twitter’s first profitable one, and the company reiterated that it expects to be profitable for the full year in 2018.

First-quarter expenses not including stock-based compensation rose 10 percent. Twitter has been cutting stock-based compensation, and total expenses were flat as a result.

The company said it saw a $21 million tax benefit from a U.S. tax overhaul carried out last year by Trump and U.S. Republican lawmakers.

The number of people using Twitter monthly rose to 336 million, up 3 percent from a year earlier and topping an estimate of 334 million from financial data and analytics firm FactSet.

Investors closely watch the number of people using the service as a sign of future ad sales potential.

Most recent user growth is international. Twitter said it added 5 million people outside the United States and 1 million people inside its home market, compared with the fourth quarter.

Total revenue rose to $664.9 million, beating analysts’ expectations of $607.6 million, according to Thomson Reuters I/B/E/S. Ad revenue was $575 million, beating expectations of $523.1 million.

“We saw growth across all regions with particular strength in the Asia-Pacific region,” Twitter said, adding that Japan continued to be its second-largest market for sales.

Videos accounted for more than half of ad revenue and was Twitter’s fastest-growing ad format in the first quarter, the company said.

Known for short messages, Twitter has paid to develop live shows and broadcast live events, using the videos to get people to spend more time on the service and to sell video ads to marketers.

Revenue from ads rose at about the same rate, 21 percent, as other revenue, which includes Twitter’s data business and rose 20 percent from a year earlier.

Twitter swung to a net profit of $61 million, or 8 cents per share, in the first quarter, from a loss of $61.6 million, or 9 cents per share, a year earlier.

Excluding items, the company earned 16 cents per share.

Analysts on average had expected 12 cents per share. (Reporting by David Ingram in San Francisco and Munsif Vengattil in Bengaluru; Editing by Peter Henderson and Lisa Shumaker)

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