By Sheila Dang
(Reuters) -Twitter Inc on Thursday reported higher revenue growth than Wall Street had expected, as the social media platform rolled out ad targeting improvements to help brands reach potential customers.
Shares of Twitter rose 5% to $73 in trading after the bell.
Since the start of the year, Twitter has raced to introduce products in new areas like audio-only chat rooms and newsletter publishing in an effort to turn around years of business stagnation and reach its goal of doubling annual revenue by 2023.
Advertising revenue totaled $1.05 billion, up 87% from the year-ago quarter, and beat Wall Street estimates of $909.9 million.
Twitter has worked to improve the effectiveness of its ads, introducing 2,500 new topic categories during the quarter to help users find content they're interested in, all of which provides more ad targeting data back to Twitter, the company said on a conference call with analysts.
"We get great signal about what people are most interested in, where they are or the places they care about," said Twitter Chief Financial Officer Ned Segal during the call.
Those improvements, along with higher demand from advertisers seeking to reach consumers as countries reopen from pandemic restrictions, helped propel ad revenue, Twitter said.
The strong results from both Twitter and its tech peer Snap Inc (NYSE:SNAP), which reported quarterly revenue growth of 116% on Thursday, shows "that the overall digital ad market is on fire right now, with the reopening further strengthening advertisers' budgets," said Ygal Arounian, a research analyst at Wedbush Securities.
Twitter reported 206 million monetizable daily active users (mDAU), its term for users who are served advertising, for the second quarter ended June 30, matching analyst targets of 205.9 million users, according to IBES data from Refinitiv.
Its U.S. user base declined by 1 million over three months from the previous quarter due to a lighter news cycle in the United States, Twitter said, with total users worldwide in line with Wall Street targets.
Total revenue, which also includes revenue the company earns from data licensing, rose 74% year-over-year to $1.19 billion, beating analyst estimates of $1.07 billion.
FUTURE INVESTMENTS
The San Francisco-based company now expects headcount and total costs and expenses to grow at least 30% for the full year, up from its previous guidance of 25%, as it invests in its engineering and product teams.
Chief Executive Jack Dorsey, a longtime proponent of bitcoin, said during the earnings call the digital currency "is a big part" of Twitter's future and could be used for ecommerce transactions on the platform or to tip popular content creators.
Twitter added that new privacy controls that Apple Inc (NASDAQ:AAPL) implemented in April, which are designed to limit digital advertisers from tracking iPhone users without their consent, had a lower-than-expected impact on revenue in the second quarter.
The full impact of Apple's changes have yet to be seen, and some concerns still linger, Arounian said.
Twitter forecast third quarter total revenue to be between $1.22 billion to $1.3 billion, roughly in line with or slightly ahead of consensus analyst estimates of $1.17 billion.
On an adjusted basis, Twitter earned 20 cents per share during the second quarter, well above the estimate of 7 cents.