Twitter delivered a surprising and much-needed positive quarterly earnings report this morning — and it’s finally seeing some positive moves in its stock price.
That’s going to be important going forward, as the company needs to convince Wall Street it can stay independent and also attract talent. Twitter, as we’ve seen time and again, reports a huge stock-based compensation expense in its earnings reports — though that was down this quarter compared to the first quarter a year ago. Shares were up as much as 12% in pre-market trading after seeing a decline over the past three months. Twitter’s last “great news” moment was arguably when acquisition talks bubbled up. After that was a bust, Twitter’s stock came back to reality.
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Twitter’s revenue is still in decline, but it’s falling more slowly than what investors expected. It also added more new users than observers expected, which has been a perpetual problem for the company. There have been some recent changes to the product as well as increased efforts to curve abuse in order to make it attractive for new users, the company said in its earnings report. Whether that’s paying off directly in the form of user growth still isn’t entirely clear, but it’s a step in the right direction.
The company has to keep activist investors off its back amid the rest of its problems, which may see Twitter as an easy target as its stock price continues to decline. CEO Jack Dorsey has said he’ll continue to run both Square and Twitter, which if the company’s business continues to decline may cause some frustration on Wall Street and spur investors to lobby for some change at the upper level.
Given Snap’s successful IPO, Twitter’s most likely going to be facing increased scrutiny to perform. While its business is still in decline, its first quarter surprise hit comes at a critical time for the company. Facebook continues to chug forward and Snap is still demonstrating it has a huge user base despite concerns about its ballooning costs. Twitter needs to keep delivering these hits if it’s going to be competitive not only to advertisers, but also to Wall Street.
You can check out our full report on Twitter’s first-quarter earnings beat here.