Twitter stock surges on surprise user growth

Jack Dorsey: Twitter shows best and worst of democracy
Jack Dorsey: Twitter shows best and worst of democracy

President Trump's favorite social network is finally winning again.

Twitter (TWTR, Tech30) added 9 million monthly active users in the first quarter of this year, shattering Wall Street estimates and helping to send the stock up more than 10% in early trading Wednesday.

The social network now has 328 million monthly users. That still puts it well behind rivals like Facebook (FB, Tech30) and Instagram, but nonetheless shows reignited growth.

In the U.S., Twitter's overall userbase increased by 3 million last quarter -- or about as much as it grew in all of 2016. Overall, the number of global users checking Twitter daily grew 14% from the previous year, signaling greater engagement on the platform.

Twitter credited the surprise uptick in new users to tweaks made to its news feed and notifications as well as marketing and some seasonality. Notably not mentioned in the earnings release: having a new president who just happens to love the platform.

On a conference call with analysts, Twitter CFO Anthony Noto hinted at the positive impact all the political chatter may be having on user engagement. "There is some evidence that we benefited from our new and resurrected users following news and political accounts in Q1, particularly in the U.S.," he said.

While the user growth is welcome news for the company, it still faces an uphill battle to turn around its business.

Twitter's sales fell to $548 million for the first quarter, down from $595 million in the same quarter a year earlier. That marks the company's first year-over-year sales decline since going public in 2013.

Related: Twitter tries new measures in crackdown on harassment

"We continue to expect revenue growth to meaningfully lag audience growth in 2017," the company wrote in a letter to shareholders Wednesday.

Twitter has worked to turn itself around through a mix of live streaming offerings, surfacing more relevant tweets for users and working to combat harassment and abuse on its platform.

Jack Dorsey, Twitter's CEO and cofounder, said the company has seen a "significant decrease" in abuse on the platform. "There's lots more to do, but we are on the right path," he said on the earnings call.

At the same time, Twitter has enjoyed even greater relevant thanks to Trump, who continues to use his personal account to put his political opponents in the hot seat and bash media outlets.

Trump's tweets generate headlines on a daily -- if not hourly -- basis, ensuring Twitter is constantly in the news cycle. But some analysts have suggested it may not do much to win over new users to Twitter.

"The ubiquitous presence of Tweets across news headlines further dilutes the need for new users to actually join the site," Michael Pachter, an analyst with Wedbush, wrote in a recent investor note before the earnings release.

In other words: Why sign up for a Twitter account when you already see the most important tweets everywhere else?

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