Twitter reported earnings on Tuesday that beat analyst expectations for revenue growth, but investors reacted negatively to the company’s revenue forecast and indications that Twitter’s user growth is stagnating.
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Twitter has about 320 million monthly active users – people who use the service at least once a month – which means the nine-year-old company is growing at a slower pace than newer forms of social media, like Instagram and Snapchat.
In comparison, Twitter’s revenues stood at $361.3 million in prior year’s third quarter (3QFY14).
During Twitter’s Q3 earnings call, CEO Jack Dorsey was joined by COO Adam Bain and CFO Anthony Noto.
Last quarter the company showed 15 percent user growth, 18 percent the quarter before that, 20 percent before that and 23 percent at this time previous year.
For the third quarter, the user growth was again lower than expected, and Twitter also issued a depressing forecast for the holiday period. When the company went public in 2013, revenue from mobile contributed just 65% of its revenue, and it had 75% of its users on mobile devices at that time.
Dorsey begun his turnaround of the company earlier this month, announcing plans to cut 8% of Twitter’s workforce and reorganise the company. However, with these latest financials encompassing the Twitter co-founder’s first full quarter in charge, investors hoping the company can emulate Facebook’s success appear to have a long wait ahead of them.
Last quarter he took a position that was critical to a few Twitter products’ possible profitability.
PureFunds CEO Andrew Chanin, a Twitter shareholder said, “People that were making a huge bet on Dorsey shaking things up within five months of being there may be disappointed, With a company like Twitter, there’s a huge risk to making any big changes”. Excluding “fast followers” who are SMS users, Twitter had 307 million monthly active users.
In May Twitter bought the assets of the retargeting company TellApart for $22.6 million. Analysts at UBS maintained a Buy rating on Twitter, along with the downward revision in its price target from $48 to $40.
“We have been singularly unimpressed with Moments, and view the service as no different or more interesting than a typical home page on any competing news site”, Wedbush analysts said.
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Indeed, the shares, down 12 percent after hours, slid not on the headline numbers, which were, and always have been, backward-looking.
