SAN FRANCISCO — Twitter’s stock plunged in after-hours trading on Tuesday after reporting a weak forecast for the fourth quarter and lagging user growth.
In the fourth-quarter, the San Francisco tech firm said it expected sales between $695 million to $710 million. Analysts surveyed by Thomson Reuters on average expected the company would report fourth-quarter sales of $739.73 million.
About 320 million people logged into Twitter at least once a month during the third quarter, up from the second quarter but below the forecast of 324 million.
The San Francisco tech firm, though, did report earnings and sales that beat Wall Street’s expectations in the third quarter, which ran from July to September.
“We continued to see strong financial performance this quarter, as well as meaningful progress across our three areas of focus: ensuring more disciplined execution, simplifying our services, and better communicating the value of our platform,” said Twitter CEO Jack Dorsey in a statement. “We’ve simplified our roadmap and organization around a few big bets across Twitter, Periscope, and Vine that we believe represent our largest opportunities for growth.”
But Twitter’s third-quarter earnings weren’t enough to keep investors happy and the stock dropped by more than 11 percent after the company released its earnings.
Twitter reported sales of $569 million, up 58 percent from the same period last year, beating the $559 million in revenue analysts surveyed by Thomson Reuters expected the company to report.
But the company also had a net loss of $132 million, or 20 cents per share, in the third quarter. That was better than the loss of 27 cents per share that analysts estimated.
Excluding certain expenses, the company earned 10 cents per share. Analysts expected earnings of 5 cents per share.
Dorsey became Twitter’s interim CEO in July after Dick Costolo stepped down from the position, but then got the permanent job on Oct. 5.
He also is the CEO of mobile payment startup Square, which recently filed plans to start selling its stock to the public.
Since Dorsey began juggling two full-time jobs, the 38-year-old tech mogul has had a busy month, announcing the release of a new feature called “Moments” to make it easier to follow live events, revealing plans to lay off up to 336 Twitter employees, apologizing to developers at an annual conference for their rocky relationship with the tech company and giving one-third of his shares back to Twitter employees.
He indicated in July that he was unhappy about Twitter’s slow user growth, noting that a turnaround will take some time.
Investors have a mixed view on Twitter’s future, questioning whether the microblogging site can grow its number of users, analysts noted before the earnings on Tuesday. Twitter, which makes most of its money from advertising, still faces competition from other social media companies with far more users, including Facebook and Instagram, a photo-sharing site that the Menlo Park tech firm owns.
“This is a critical question for the company and one we believe management is fully aware of and actively working to improve Twitter’s positioning – Moments is an example,” wrote Bob Peck, an analyst with SunTrust Robinson Humphrey in a note. “As organic growth has slowed Twitter has refocused on product initiatives and iterations.”
Contact Queenie Wong at 408-920-2706. Follow her at Twitter.com/QwongSJ.
