Closing the era of one chief executive and entering another under temporary leadership, Twitter exceeded investor expectations on Tuesday, reporting a 61 percent increase in revenue and a narrower loss than the previous year.
However, company executives warned that the social network was still too difficult for the majority of potential users and turning that around would take considerable time.
“You should expect Twitter to be easy to use as looking out your window,” Twitter interim chief executive officer Jack Dorsey said in a conference call to discuss the results.
The grim outlook sent the company’s shares down more than 5 percent in after-hours trading, after they rose initially on the results.
Twitter said that the number of people using its social network rose by only 2 million over the past three months to 304 million. The user growth numbers are closely watched by Wall Street.
Revenue, most of which comes from advertising, was US$502 million, compared with US$312 million last year. The company posted a net loss of US$137 million, or US$0.21 per share, as it spent heavily on stock compensation to attract and retain employees. In the same quarter last year, it posted a loss of US$145 million, or US$0.24 per share.
Excluding stock compensation and certain other expenses, Twitter posted a profit of US$49 million, or US$0.07 per share.
The quarter that ended June 30 was the last under former Twitter chief executive officer Dick Costolo, who resigned on July 1 following months of complaints by investors disappointed in the company’s performance.
Dorsey and chief financial officer Anthony Noto implicitly acknowledged the validity of that criticism, saying that Twitter’s performance had been unacceptable.
After several warnings by the company, Wall Street analysts had been cautious in their expectations for the quarter. On average, analysts had projected that the company would post revenue of US$481 million and profit of US$0.04 per share, after eliminating the compensation expenses.
“Overall in social media, spending trends are improving,” Robert W. Baird & Co analyst Colin Sebastian said in an interview before the results were released. “But Facebook is taking the lion’s share, and Twitter is trying to find its way, both in terms of growing the number of users and advertising dollars.”
Twitter also offered its outlook for the rest of the year. For the third quarter, the company projected revenue of between US$540 million and US$560 million, and adjusted earnings before interest, taxes, depreciation and amortization of between US$110 million and US$115 million.
For the full year, the company projected revenue of US$2.2 billion to US$2.27 billion and earnings before interest, taxes, depreciation and amortization of between US$520 million and US$540 million. That is generally in line with what analysts had expected.
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