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A Closer Look at Twitter’s Revenue Growth Drivers in Q1 2019

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Twitter beats revenue estimates in the first quarter

Social media giant Twitter (TWTR) topped Wall Street’s estimates and its own expectations on revenue in the first quarter. Its top line of $787 million not only surpassed the consensus estimate by 1.4% but also rose ~18% from the previous year’s period. Its revenue also beat its guidance range of $715 million–$775 million.

Higher-than-expected monthly user numbers in the first quarter fueled the company’s revenue in the quarter and boosted investors’ confidence, sending the stock up ~7% in premarket trading on April 23.

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Twitter’s revenue growth

Twitter’s revenue growth of 18% YoY (year-over-year) came on the back of growth in the advertising business, double-digit growth in both domestic and international revenue, and a rise in data licensing and other revenue. Excluding currency headwinds, Twitter’s revenue rose 20% driven by a 20% rise in each of the data licensing and advertising businesses. While its domestic revenue rose 25% YoY, its international revenue rose 15% YoY excluding the impact of currency.

Twitter’s total revenue and advertising growth have been declining for the past two straight quarters.

Advertising revenue

Twitter’s advertising revenue was $679 million in the first quarter, a rise of 18% YoY and 20% YoY excluding currency. This double-digit advertising growth was fueled by more ad engagements and a lower cost per engagement. While its total ad engagements increased 23% YoY, its cost per engagement decreased 4% YoY in the first quarter.

Like Twitter, Internet peers Snap (SNAP), Facebook (FB), Yelp (YELP), and Alphabet’s (GOOGL) Google also rely mostly on advertising for revenue generation. In the fourth quarter of 2018, Facebook’s ad sales growth of 30% YoY was higher than Twitter’s and Google’s ad sales growths of 23% YoY and 20% YoY, respectively.

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