San Francisco

Twitter Inc shares surged 25 per cent before the bell on Thursday after the social network reported its first quarterly profit and better-than-expected revenue, helped by ads that better targeted users and sales growth outside the United States.

Investors shrugged off zero growth in Twitter users from a quarter earlier, which the company blamed in part on seasonal weakness and its purge of fake and spam accounts.

Shares traded at $33.70 pre-market and were set to open at their highest level since July 2015.

Twitter reported a net profit of $91.1 million, or 12 cents per share, compared to a loss of $167.1 million, or 23 cents per share, a year earlier.

Twitter’s previous inability to turn a profit had confounded investors given the company’s ubiquitous presence in the media and popularity among celebrities, athletes and politicians such as US President Donald Trump.

In October Twitter had signalled it could turn a quarterly profit as it slashed expenses. Revenue and adjusted fourth-quarter profit both topped analysts’ targets.

“The revenue number was up year-over-year for the first time in several quarters, which is a good sign,” analyst Michael Pachter of Wedbush Securities said, adding that flat growth in monthly users was a warning sign.

Twitter reported 330 million monthly active users for the quarter, a 4 per cent increase from a year earlier but flat from the third quarter.

Overall revenue rose 2 per cent year-over-year to $731.6 million, the first increase since the fourth quarter of 2016, beating Wall Street’s target of $686.1 million, according to Thomson Reuters I/B/E/S.

Analysts on average had expected 332.5 million monthly active users, according to financial data and analytics firm FactSet.

US revenue fell 8 per cent from a year earlier, but sales elsewhere rose 17 per cent. Revenue from Japan was a particular strength, rising 34 per cent to $106 million.

Twitter said revenue was helped by better ad targeting that raised clickthrough rates, or the likelihood users click on ads, and higher video ad sales.

The company also continued a push to grow its non-advertising revenue. It reported $87 million in data licensing and other revenue, up 10 per cent from a year earlier, outpacing advertising revenue which rose 1 per cent to $644 million.

Chief Executive Jack Dorsey has focused for the past year on tweaking the product he cofounded to attract more users.

Dorsey doubled the number of characters allowed in each tweet in most languages and tried to limit user harassment on the site. Twitter has also struck deals with media companies for live news and entertainment shows.

San Francisco-based Twitter said usage was hurt by seasonal weakness and a change that Apple made to its Safari web browser that reduced the tally of users by 2 million.

Twitter had warned investors about the factors in October.

Twitter also said in a shareholder letter it had stepped up efforts to reduce spam and automated and fake accounts.

Monthly active users in the United States, where Twitter makes most of its revenue, fell to 68 million from 69 million in the third quarter.