Twitter plummets 14% on revenue, outlook miss

SAN FRANCISCO — Wall Street's view of Twitter can be summed up in far fewer than 140 characters: Too little growth.

Twitter shares (TWTR) plunged more than 14% Wednesday after the social media company released financial results after the bell Tuesday. Revenue came in lighter than analysts had forecast and second-quarter revenue guidance fell far short of expectations. Making matters even worse for the beleaguered company, user growth only crept up.

The first-quarter triple whammy raised fresh concerns that Twitter will fall even farther behind market leaders Facebook and Google in attracting digital advertising dollars. In a tweet, Twitter acknowledged that "brand marketers did not increase spend as quickly as expected" in the first quarter.

"For the past several quarters the concern was user growth, but now Twitter is admitting that there is trouble in the advertising business, and that's somewhat new,"  said eMarketer Research analyst Debra Aho Williamson. These brand advertisers are the companies that Twitter built its business on, she said.

"To see them admitting they are having problems getting brand advertisers to increase their budgets is troubling. It really is."​

Jack Dorsey, who returned as CEO in July, may have one of the toughest jobs in tech: Trying to breathe new life into Twitter, which has underwhelmed investors nearly from the start.

The company founder has shaken up the executive ranks and replaced two longtime board members with PepsiCo CFO Hugh Johnston and British entrepreneur Martha Lane Fox. He scored a deal to live stream National Football League games. And he has crafted changes to Twitter to make it easier for people, especially newcomers, to use.

Yet, for all his efforts, Twitter's long anticipated turnaround is nowhere in sight, and investors are growing impatient.

"The guidance definitely shows there is a deceleration in revenue growth and shows again that Twitter has a lot of work to do," Williamson said.

Twitter said it generated revenue of $595 million, up 36% year over year, but well below Wall Street's target of $607.5 million.

Also disappointing to investors: the sales outlook. Twitter said it expected second-quarter revenue in the range of $590 million to $610 million. Wall Street had forecast $677.1 million.

For all its other travails, Twitter faces another challenge: It's unprofitable. Its loss narrowed to $79.7 million, or 12 cents a share, from a loss of $162.4 million, or 25 cents a share, in the year-ago quarter. Excluding certain expenses, Twitter said it would have earned 15 cents a share, up from 7 cents a year earlier. Analysts had expected earnings of 10 cents a share.

On the plus side, Twitter did record a meager uptick in user growth in the first quarter. Twitter reported it had 310 million monthly active users in the first quarter, up 3% year over year and up 1.6% from the previous quarter. Analysts had expected 308 million.

In the fourth quarter, Twitter reported monthly active users fell to 305 million from 307 million in the previous quarter.

Starting in the first quarter, Twitter said it would no longer count so-called "SMS fast followers," people who access the service through text messages, in the monthly active users figure. Including fast followers, Twitter had 320 million users in the fourth quarter.