Twitter Earnings Preview: Margins To Expand Despite Slowdown In ARPU Growth

45.08
Trefis
TWTR: Twitter logo
TWTR
Twitter

Twitter (NYSE:TWTR) is scheduled to announce its Q1 results on Wednesday, April 25. The company reported a slowdown in revenues through 2017, mainly due to a 13% fall in average revenue per user (ARPU) for its U.S. segment. As a result, the company’s core U.S. revenues were down nearly 10% for the year to $1.4 billion. Comparatively, international ARPU was up 2%, which was complemented by a 4% increase in monthly active users (MAUs) outside the U.S. As a result, international revenues were up 7% to just over $1 billion.

The primary reason for the drop in ARPU in the U.S. was the 52% decrease in average cost per ad engagement through the year, despite a 96% annual increase in the total number of ad engagements. This was attributable to much of the ad content switching to video-based ads, which have typically had lower cost per ad engagement compared to other formats. Going forward, we expect Twitter to monetize video ads better, thereby improving its ARPU to prior year levels.

Relevant Articles
  1. Twitter Stock Gained 9% In One Week, Where Is It Headed?
  2. Twitter Stock Posted Weak Results In Q2, What To Expect Next?
  3. Company Of The Day: Twitter
  4. Company Of The Day: Twitter
  5. Is Twitter’s Stock Undervalued At The Current Price?
  6. What’s Next For Twitter’s Stock?

For the March quarter, we forecast the company-wide MAUs to increase by 4-5 million to 330 million, with ARPU increasing by around 15 cents over the comparable prior year period to $1.85 for the quarter. As a result, we forecast Twitter’s net revenue to increase by over 10% to $605 million, while net income and EPS are expected to increase by over 15% on a y-o-y basis. We have summarized our expectations on our interactive dashboard platform. If you disagree with our forecasts, you can change the key drivers – such as active users and average revenue per user (ARPU) – for Twitter to gauge how changes will impact its expected revenue. You can also change margins to arrive at the expected EPS for the quarter.

See Our Full Analysis For Twitter

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own