Cost-reductions have underpinned Twitter’s profits
Twitter (TWTR) first became profitable a little more than a year ago, reporting its first-ever quarterly profit of $91 million in the fourth quarter of 2017. Twitter has been churning out profits every quarter since then, posting a profit of $255 million in the fourth quarter of 2018.
When Twitter reports its results for the first quarter of 2019 in April, its profitability will be a big focus for investors. In the first quarter of 2018, Twitter made a profit of $61 million supported by an increase in its revenue and better cost controls. Twitter’s operating expenses in the first quarter of 2018 were flat at $590 million compared to a year earlier. Generally, cost reductions have been at the center of Twitter’s profitable quarters that we’ve seen so far.
Future profits to rely on revenue growth
As Twitter gears up to release its results for the first quarter of 2019, investors may notice that the company’s costs have started climbing, signaling that its future profits will rely more on revenue growth. For this revenue growth, Twitter will need to capture more advertising dollars, as advertising contributes the bulk of its revenue at nearly 90%.
Twitter’s revenue rose 24% YoY (year-over-year) to $909 million in the fourth quarter of 2018. Facebook (FB), Alphabet (GOOGL), and Yelp (YELP) recorded revenue rises of 30%, 22%, and 11% YoY, respectively, in the fourth quarter. Snap’s (SNAP) revenue rose 36% YoY in the fourth quarter.