Twitter hits 52-week low on warning turnaround will take time

SAN FRANCISCO — Twitter shares plunged to a 52-week low after interim CEO Jack Dorsey said during the company's earnings call on Tuesday that growth would not return to the service anytime soon.

Twitter's (TWTR) stock drop came after straight talk from Dorsey and Twitter Chief Financial Officer Anthony Noto.  They said Twitter faced a dramatic turnaround that was going to take "considerable" time.

Twitter's central challenge is the same one it has struggled with for years: It must overhaul the service that many find too complicated and clunky to make it far more appealing to the mainstream. Until it does, Twitter says not to expect too much.

"We don't expect to see sustained, meaningful growth...until we reach the mass market," Noto said. "We expect it to take a considerable period of time."

Twitter executives placed the blame for Twitter's predicament on problems with the product itself and with how it's marketed. And they pledged to change both.

New product features such as "instant timelines" which automatically generate a feed for new users based on their interests have yet to have a "meaningful impact," Dorsey said.

"This is unacceptable and we're not happy about it," said Dorsey, pledging to tackle the challenge head on by making the product "easier and more compelling to more people."

The San Francisco company said 316 million people signed in to use the service at least once a month during the second quarter, up from 308 million in the first quarter. Twitter is about one-fifth the size of rival Facebook, which has nearly 1.5 billion users.

"Twitter's leadership is going to have to answer once and for all the question of whether it's going to be stuck at 300 million users or so forever, or whether they really can get back to growth," said Jan Dawson, chief analyst at Jackdaw Research.

On the bright side: Twitter is making more money per user. But Dawson says that's because it's showing users more ads.

"Twitter is getting increasingly good at monetizing the users they have, which is a very good thing since they seem to be increasingly struggling to add users," Dawson said. "The number of users they added was by far the lowest they've ever reported, and the trend is downward."

Twitter shares initially soared after the struggling company beat Wall Street estimates.

Twitter reported $502 million in second-quarter revenue and adjusted earnings of 7 cents a share.

Wall Street had expected Twitter TWTR to report $481.3 million in revenue. The forecast was in line with the company's guidance of $470 million to $485 million.

Consensus was for adjusted earnings of 4 cents a share, up from 2 cents a share a year ago. Including the omitted expenses, the company was expected to post a loss of 27 cents a share, according to Thomson Reuters.

The 61% jump in revenue suggests that Twitter's advertising business has pushed past last quarter's unexpected shortfall. Still, there is no getting around the fact that it ranks as Twitter's smallest quarterly revenue growth as a publicly traded company.

Twitter has also yet to turn a profit. It posted a loss of $136.7 million, or 21 cents a share. That compares to a year-ago loss of $144.6 million, or 24 cents a share.

It's also experiencing brain drain. Right before Twitter released its second-quarter earnings, two executives announced their departures from the company. Todd Jackson, who has been director of content and discovery since Twitter bought his mobile app startup, Cover, in 2014 said he was joining Dropbox as head of product. Christian Oestline, vice president of product management, is joining YouTube.

Dorsey pledged that he's "entirely focused on building the best team."

Dorsey's remarks during the company's quarterly earnings call with analysts were his first since returning to Twitter as interim CEO.

He dodged the question on whether he's a candidate to take on the job permanently. Dorsey, who is CEO of digital payments company Square which has confidentially filed for an initial public offering, said Twitter had no update on the CEO search.

Dorsey and Twitter's head of global revenue and partnerships Adam Bain are both considered top candidates for the job. Twitter's board of directors is conducting the search for a new CEO that is reviewing internal and external candidates.

Under Dorsey, the earnings call was streamed on Twitter's live video service Periscope.

Follow USA TODAY senior technology writer Jessica Guynn@jguynn.