Here's how Twitter plans to become profitable for the first time

Key Points
  • Twitter will have its first profitable quarter in Q4 if it hits its high estimate for adjusted EBITDA.
  • To reach that goal it's cutting costs, looking for new ways to get advertisers involved and diversifying its revenue stream away from advertising.
Here's how Twitter plans to become profitable for the first time

Twitter said during its latest earnings that if it hits its high estimate for adjusted EBITDA next quarter it will finally be profitable.

Twitter shares climbed more than 18 percent after earnings were reported on Thursday, showing it was able to cut costs and grow its user base. The company aims to be profitable by next quarter by being more cost-efficient, looking at new ways to get advertisers involved and diversifying its revenue stream.

The lion's share of Twitter's revenue comes from advertising. It earned $508 million in ad revenue this quarter, and the company is expected to make $1.21 billion in digital ad revenue this year, which would rank sixth among U.S. online advertising companies, per eMarketer.

Twitter said during an earnings call Thursday it has increased its self-service advertising business, which allows companies to buy ads through an auction-based platform. It also means brands don't have to buy through a sales team, which cuts costs. The company added it plans to expand self-service buying, as well as create new ways for advertisers to buy ads.

It's also looking at expanding its online video advertising business. Video is currently its largest ad format, especially sponsored video content and in-stream commercials. One way Twitter thinks it can boost this is by helping TV networks and advertisers extend their reach during live events.

"Our strategy is clearly to align with TV to drive incremental reach to them and frankly tune into their core product," Twitter's VP of revenue, Matt Derella, told CNBC. "We're really an extension of what they are doing."

By using curated video and live tweets, Derella said, Twitter can push people to watch live TV. For example: It has worked with the NFL for in-game highlights and the PGA Tour to stream the first 60 to 90 minutes of some events, which can encourage people to tune in for the rest of programming.

When it does original programming, the content really is focused on "what's happening right now." BuzzFeed's "Am To DM" is a live morning show focused on getting people up to speed with trends, while a Bloomberg 24/7 network specifically for Twitter is in the works.

"We absolutely see an opportunity when [users] are on the move and not in front of a television," Derella said. "Our job is to show people what's happening in the world. What are they talking about?"

In addition, the company isn't only relying on advertising revenue. Though advertising revenue declined 8 percent year over year, data licensing and other revenue increased 22 percent over the same period. It plans to expand its data and enterprise solutions divisions.

Note: CNBC parent company NBCUniversal is an investor in BuzzFeed.