Is Slowing Sequential User Growth Really That Bad for Twitter?

Twitter Inc. (NYSE: TWTR) reported its third-quarter financial results on Thursday before the opening bell. The firm said that it had $0.04 in earnings per share (EPS) and $936 million in revenue, which compares with consensus estimates that called for $0.06 in EPS and revenue of $777.15 million. The same period of last year reportedly had EPS of $0.05 on $823.72 million in revenue.

In the latest quarter, total revenues increased 14% year over year. At the same time, costs and expenses totaled $880 million, an increase of 13% year over year. This consisted of US revenue increasing 10% year over year to $513 million and International revenue growing 18% to $424 million.

Overall, the rise in revenue in the quarter reflected an increase in total ad engagements and the dropping costs for these engagements. Total ad engagements increased 27% year over year, and cost per engagement decreased 9%.

Average monetizable daily active users (mDAU) totaled 187 million for the third quarter, compared to 145 million in the same period of the previous year and to 186 million in the previous quarter. In terms of a percentage, Twitter grew mDAU by 29.0% year over year.

Management noted advertisers significantly increased their investment on Twitter in the third quarter, engaging its larger audience around the return of events as well as increased and previously delayed product launches, ultimately driving revenue even higher.

On the books, cash, cash equivalents, and short-term investments totaled $7.68 billion at the end of the quarter, versus $6.64 billion at the end of the previous fiscal year.

The company did not issue any real concrete guidance for the fourth quarter in its report but analysts are calling for $0.23 in EPS on $1.05 billion in revenue.

Twitter stock last closed at $52.43, with a 52-week range of $20.00 to $52.93. The consensus price target is $40.99. Following the announcement, the stock was down 11% at $46.50 in the after-hours session.