Brief:

• Twitter beat Wall Street analysts' expectations in Q2 earnings results released Friday, posting 18% year-over-year (YoY) revenue growth to $841 million. 
• Ad revenue grew 21% YoY to $727 million, with total ad engagements jumping 20%. Cost-per-engagement was flat, the company said. The U.S. was a standout market, making up $455 million of ad sales. Monetizable Daily Active Users (mDAUs), a new audience metric Twitter introduced in place of reporting monthly active users, stood at 139 million, up 14% YoY.
• In a letter to shareholders, Twitter said that Q3 revenue growth could be lower than in the year's first half. The company attributed the slowdown in part to the retiring of older ad formats. Improvements to the stability, performance and scale of Twitter's ad platform and mobile app over the course of the next few quarters were forecast to have a gradual impact on revenue. Twitter also recently introduced a redesigned desktop app that's been met with middling reviews from users. 

Insight:

Twitter's bigger focus on making advertising more engaging and relevant to users, including through machine learning and fresh video offerings, appeared to pay off in Q2. Gains in revenue and user numbers could still be offset later this year as new ad formats take the place of legacy ones and the platform ramps up efforts to clean up its overall health, scrubbing bot accounts and taking a harder line against abuse.

"Health remains our top priority and we are proud of the work we did in Q2," CEO Jack Dorsey said in a statement, noting that there was an 18% drop in reports of spammy or suspicious behavior over the quarter. "In addition, we continued to leverage machine learning to deliver more relevant content, driving increased usage of Twitter on a daily basis, with mDAU up 14% year-over-year."

On a pure user engagement basis, the company's results look strong, adding 5 million mDAUs from Q1. However, mDAUs are a somewhat unusual metric. They replace monthly active users, which were a frequent pain point for Twitter. Twitter has copped to the fact that mDAUs are not based on any standardized industry methodology, according to TechCrunch, which makes it hard to gauge the significance of their growth compared to tech peers.

Twitter defines mDAUs as logged-in users across its app and web properties who are able to see ads on any given day, per TechCrunch, so the jump in growth might still be appealing to advertisers. Some big marketing opportunities are also coming down the pike as Twitter continues to spotlight newer areas like live video. 

NBC announced earlier this week that it would produce a daily studio show exclusively for the platform as part of its coverage of the 2020 Olympics in Tokyo. The network forecast it will receive record ad sales of more than $1.2 billion for the games.

Twitter has in recent months expanded tools for advertisers that could help further drive revenue. In March, CFO Ned Segal called out efforts to invest more in Twitter's mobile app promotion platform for direct response marketing. Segal at the time said that video ads made up more than half of Twitter's total ads in the past year. At VidCon, a conference for content creators, Twitter also announced a new creative division called "ArtHouse" that assists brands with digital strategy, video creation, livestreaming and influencer management.