Twitter misses expectation on revenue but adds millions more users

Jack Dorsey

Twitter stock fell more than 12% in after-hours trading after the company reported revenue of $595m on Tuesday, missing expectations. Twitter was expected to report $607.8m in revenue. Meanwhile, its earnings, which were expected to be 10 cents a share, exceeded expectations at 15 cents a share.

The real bright spot in Twitter’s first quarter report was its user growth.

The first quarter saw Twitter’s number of active users rise to 310 million, 2 million more than expected by Wall Street. Any growth would have been an improvement over last quarter, when Twitter reported that it was actually losing members. In February, the company reported that its user base had dropped to 305 million, down from 307 million users from the previous quarter.

According to Twitter, the number of its active monthly users is up 3% year on year.

The growth in users is good news for the company. If Twitter figures out how to grow its user base, “its advertiser base will grow dramatically”, Michael Pachter, an analyst with Wedbush Securities, said in a research note released on Monday.

“This is our first quarterly update after laying out our long-term strategy and priorities,” the company reminded its shareholders. The end of this quarter also marked six months since Jack Dorsey, who co-founded Twitter in 2007, was re-appointed CEO of the company. Dorsey officially replaced Dick Costolo, Twitter’s former CEO, on 5 October.

In its quarterly report, the company pointed out that use of its direct message function had increased over the past year.

“We are also the best service in the world on which to have or see a public conversation – and then take it private,” it said. “This aspect of our service is expanding nicely: the total number of unique direct messages (DMs) sent is up almost 50% year-over-year and Tweets shared via DM are up more than 75% quarter-over-quarter. We’ve made DMs richer this quarter with the addition of video and GIFs and we’re going to continue improving the experience.”

Even the news of Twitter’s user growth was not good enough to stop its stocks from falling more than 12% in after-hours trading.

On Tuesday, Twitter shares were worth half of what they were in November 2013, when the company went public. Two-and-a-half years since its initial public offering and 10 years after it was founded, Twitter has yet to become profitable.

“Revenue came in at the low end of our guidance range because brand marketers did not increase spend as quickly as expected in the first quarter,” the company said in a letter to its shareholders.

The first-quarter revenue totaled $595m, an increase of 36% year on year. Advertising revenue was $531m, an increase of 37% year on year. One of the ways that Twitter said it hopes to increase its ad revenue is to focus on video, which requires Twitter “to provide a set of additional features including more detailed demographic targeting and verification, and reach and frequency planning and purchasing”.

“These features are in development and will launch in the fall as we bring our new NFL/Thursday Night Football ad opportunity to market,” the company said on Tuesday. Earlier this month, Twitter announced that it won the bidding war to live-stream 10 games from the NFL’s regular season. The company will also live-stream in-game highlights and live pregame interviews on its streaming platform, Periscope.

Twitter’s guidance for its second quarter revenue stands between $590m to $610m.

Powered by Guardian.co.ukThis article was written by Jana Kasperkevic in New York, for The Guardian on Tuesday 26th April 2016 22.37 Europe/London

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