Twitter (NYSE:TWTR) Reports Sales Inline With Analyst Estimates In Q4 Earnings, Stock Soars 8.14%

Jabin Bastian /
2022/02/10 7:31 am EST
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Social network Twitter (NYSE: TWTR) reported results inline with analyst expectations in Q4 FY2021 quarter, with revenue up 21.5% year on year to $1.57 billion. However, guidance for the next quarter missed analyst expectations with revenues guided to $1.22 billion at the midpoint, or 3.12% below analyst estimates. Twitter made a GAAP profit of $181.6 million, down on its profit of $222.1 million, in the same quarter last year.

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Twitter (TWTR) Q4 FY2021 Highlights:

  • Revenue: $1.57 billion vs analyst estimates of $1.57 billion (inline)
  • EPS (non-GAAP): $0.33 vs analyst expectations of $0.34 (3.38% miss)
  • Revenue guidance for Q1 2022 is $1.22 billion at the midpoint, below analyst estimates of $1.25 billion
  • Free cash flow was negative $666.8 million, compared to negative free cash flow of $20.1 million in previous quarter
  • Gross Margin (GAAP): 67.1%, up from 66.4% same quarter last year
  • Monetizable Daily Active Users: 217 million, up 25 million year on year

Born out of a failed podcasting startup, Twitter (NYSE: TWTR) is the town square of the internet, one part social network, one part media distribution platform.

Businesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.

Sales Growth

Twitter's revenue growth over the last three years has been strong, averaging 20.2% annually. Twitter's revenue took a hit when the pandemic first hit, but it has since rebounded strongly, as you can see below.

Twitter Total Revenue

This quarter, Twitter reported a decent 21.7% year on year revenue growth, roughly in line with what analysts expected.

Guidance for the next quarter indicates Twitter is expecting revenue to grow 17.7% year on year to $1.22 billion, slowing down from the 28.2% year-over-year increase in revenue the company had recorded in the same quarter last year.

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Usage Growth

As a social network, Twitter can generate revenue growth by increasing user numbers, and by charging more for the ads each user is exposed to.

Over the last two years the number of Twitter's daily active users, a key usage metric for the company, grew 22.8% annually to 217 million users. This is a strong growth for a consumer internet company.

Twitter Monetizable Daily Active Users

In Q4 the company added 25 million daily active users, translating to a 13% growth year on year.

Key Takeaways from Twitter's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Twitter’s balance sheet, but we note that with a market capitalization of $30.1 billion and more than $6.39 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

It was great to see that Twitter’s user base is growing. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Twitter. The company is up 6.63% on the results and currently trades at $40.33 per share.

Twitter may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.