Twitter’s stock is up around 7 percent after reporting a big financial quarter, beating expectations on both profit and revenue. However, its user growth was decidedly weak.
The company added a mere 4 million new monthly active users in the quarter, which is an adjustment that it will likely explain on its earnings call. That 4 million figure bumped Twitter’s monthly active user tally up from 284 million in its third quarter, to 288 million in the fourth.
Up 20 percent compared to the year-ago quarter, it was a gain of just 1.4 percent on a sequential-quarter basis. Here’s the carnage:
It’s worth noting that the company appears to grow more slowly in the fourth quarter than other quarters — the trend is noticeable in every year except 2012. So, seasonality is likely at play in the company’s result.
Twitter is still growing, but that final figure is dangerously close to zero. And if Twitter actually stops growing, even for a quarter, and shrinks, expect investors to release holy hell all over the company’s management team.
The company’s consistent ability to meet or beat financial targets, and inability to attract new users has become something of a rote result. Why does user growth matter? Twitter’s future cash flows are predicated on getting new feet in the door, since it can’t juice infinite dollars from a finite and stagnant pool.
Chart by Bryce Durbin