3 things to watch for in Twitter's earnings report – The Motley Fool

Twitterof (NYSE: TWTR) stock has fallen 33% in the last three months. Investors could, however, soon change their minds as the company is expected to post an increase in its revenue and earnings per share from one year to the next at the time of publication. its third quarter financial report on October 25.

The social media company had an encouraging year in terms of financial reporting. Over the last three quarters, Twitter has turned 180 degrees and started reporting GAAP profitability (unadjusted) rather than losses. In addition, the growth of its turnover has accelerated. But investors still do not know if Twitter can be trusted to achieve solid financial results.

Here are the top three things to watch for in his earnings report, which is expected Thursday before market opening.

1. Revenue growth

Investors will want to know first if Twitter can follow its growth story in 2018. Twitter has managed to post three consecutive quarters of revenue growth. Investors now want the company to grow for the fourth straight quarter.

Last quarter, Twitter grew 24% over the previous year, reaching $ 711 million. This represents an acceleration from the 21% and 2% growth in revenues recorded in the first quarter of 2018 and the fourth quarter of 2017, respectively. Twitter's revenue growth is expected to slow somewhat in the third quarter, but is expected to be even stronger compared to last year.

Twitter revenues have been on the rise this year thanks to the growth of a few key companies. First, its advertising business grew 23 percent year-over-year in the last quarter, as advertisers began to trust Twitter again as the company strives to update its product. Second, Twitter's data licensing and other revenue activities grew 29% year-over-year in the last quarter.

2. Daily Active Users (DAU)

The second most important measure for Twitter is its number of daily active users (DAU). Although Twitter does not indicate the exact number of DAUs, it displays metric growth rates. Last quarter, the company recorded 11% growth in SADs compared to the previous year. This was up from 10% in the first quarter, but below the 12% and 14% growth in the third and fourth quarters of 2017, respectively.

The SADs are important for Twitter because they can prove to investors that the engagement of users with the platform increases, even though the number of monthly active users (MAU) does not increase.

3. Monthly active users (MAU)

While Twitter's revenues have increased, its UAMs have been slightly affected last quarter. In July, Twitter reported 335 million UMM for the quarter, one million less than the 336 million recorded in the previous quarter. Twitter's stock plunged 27% in July.

Seeing a drop in MAU looks bad for the company, but that's not all. Twitter said it has purged its bot and spam platform, which has naturally resulted in a decline in the number of users. This is ultimately a good thing because Twitter will have a better idea of ​​how many real users are engaging on its platform. However, in the meantime, measuring its UAMs could be a concern for investors.

Last quarter, Twitter warned that it could lose "millions to an average figure" over the next few months. Thus, during the quarter, investors can expect a further sequential decline of 1 to 2 million UAM, while Twitter strives to rid its site of fake accounts.