Twitter (NYSE: TWTR) has, for the first time in its history, reported a GAAP profit. Has it finally figured out how to leverage social media to deliver a profitable and growing business venture? Have all its troubles ended? 

Twitter’s Financials

For the fourth quarter of the year, Twitter’s revenues grew 2% over the year to $732 million, beating the Street’s forecast of $686.1 million. GAAP net income was $91 million, or $0.12 per diluted share. Non-GAAP net income was $141 million, or $0.19 per diluted share, ahead of the market’s projected earnings of $0.14 per share.

By segment, Data licensing and other revenue grew 10% to $87 million. Advertising revenue was $644 million, up from $638 million last year. By ad format, video was the largest, driven by strength in Video Website Cards, Video App Cards, In-Stream Sponsorships, and In-Stream Video Ads. Other ad formats such as DR website clicks and Mobile App installs also performed well.

US revenue declined 8% to $406 million and international revenue grew 17% to $326 million. Japan grew 34% year-over-year and accounted for 15% of total revenue or $106 million.

Total advertising engagements were up 75%. Cost per engagement (CPE) was down 42% y-o-y, which was a more moderate decline compared to declines of 63%, 53% and 54% in the first three quarters of the year due to stabilizing video prices and stronger demand.

Total GAAP expenses declined 28% to $621 million with traffic acquisition costs amounting to $20 million, down 55%. Twitter’s first profitable quarter is mainly due to its focus on cutting costs and attracting advertising revenue through live video.

Average monthly active usage (MAU) was 330 million, up 4% but flat compared to third quarter and below analyst estimate of 333 million. Daily active usage grew 12%. MAU was impacted by seasonality and the change to Safari’s third-party app integration as well as increased information quality efforts to reduce malicious activity and fake accounts.

For the full year 2017, Twitter’s revenue declined 3% to $2.4 billion. GAAP net loss was $108 million or $0.15 per share compared to loss of $457 million or $0.65 per share a year ago.

For the first quarter, Twitter expects adjusted EBITDA to be between $185 million and $205 million. It did not provide specific revenue guidance for the first quarter and full year 2018.

In January, COO Anthony Noto announced in January that he would be resigning from Twitter and would be taking over as CEO of finance startup SoFi from March. Twitter has decided not to replace him, but instead split his duties among other executives.

Questions for the Board

There is huge media pressure for social media giants Facebook and Twitter to take more responsibility for hate speech, fake accounts, fake news, destroying democracies, etc.

Twitter has introduced new measures to tackle these issues. As per its new rules, it will remove tweets that glorify violence or the perpetrators of a violent act and will permanently suspend accounts that repeatedly violate this rule. Even accounts that affiliate themselves with organizations that “use or promote violence against civilians to further their causes” will be suspended.

But will these be enough? Under Twitter’s old policies, specific threats of violence, death, or disease to an individual or a group of people were considered a violation. But Twitter plans to do a better job now with better communication. Will it be execute better?

As it deals with the issue of fake accounts, what will be the effect on its user base? Twitter’s user base of 330 million is still minuscule compared to Facebook’s 2.13 billion. Although Twitter has achieved profitability, albeit by cutting costs, its revenue and subscriber growth is meager. How does it plan to address this? Will it be able to sustain the momentum and deliver profits in the future as well? Will it be able to achieve that without COO Noto?

Following its result announcement, its stock hit a 52-week high of $35. It is currently trading at $30.95 with a market capitalization of $23 billion. It had fallen to a 52-week low of $14.12 in April last year.