Twitter shares are surging in the pre-market, up 13%, after the company reported stronger than expected Q3 earnings and revenue thanks to higher spending from advertisers, even as the company’s Monthly Active Users dropped to 326 million in the third quarter, below the 330 million expected, and a decrease of 9 million from the second quarter.
The social media company reported Q3 adj. EPS of 21c, above the 14c estimate on revenue of $758.1 million, also above the $701.3 million expected.
Adjusted Ebitda of $295.4 million, beating consensus estimates of $237.4 million.
Twitter’s 29% jump in revenue marks the third consecutive quarter of double-digit growth according to Bloomberg, and Twitter has reported positive net income for four straight quarters.
At the same time, while sales and earnings have grown stronger, Twitter has suffered from a drop in user metrics, especially after purging its ranks to eliminate fake accounts, an effort that continues ahead of the U.S. midterm elections in November.
“We have a more engaged audience and we are delivering a better return on investment for advertisers,” Chief Financial Officer Ned Segal said in an interview with Bloomberg. “We are now seeing the fruits of our labor and going into the fourth quarter we have the wind in our backs.”
Like Facebook, Twitter had come under pressure to clean up its platform even as it relies on user growth to drive its advertising business. The company said it had kicked off millions of accounts in recent months, and while the company acknowledged that it has had to divert resources to cope with the challenge, executives say the cost is necessary to support the health of its platform over the long term.
As a result of this cleanup, the number of MAUs fell to 326 million (International MAUs 259 million; U.S. MAUs 67 million), down 9 million from the second quarter and below the 330 million analysts expected. The user number was also down 4 million from the same quarter a year ago. Twitter warned in its July earnings report of a continued drop in the metric as a result of efforts to clean up its service and stricter privacy rules in Europe. The company said those trends will continue and lead to another decline in monthly users for the fourth quarter.
