SAN FRANCISCO — Twitter’s stock plunged in after-hours trading Tuesday after reporting a weak forecast for the fourth quarter and lagging user growth.
In the next quarter, the San Francisco tech firm said it expects sales of $695 million to $710 million. Analysts surveyed by Thomson Reuters on average expected the company to 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. 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 and continued to fall even after a call to investors.
Twitter CEO Jack Dorsey said during the call that the tech firm is focused on making the service simpler to use, better communicating why it matters and having a more disciplined execution.
He didn’t offer any details about the company’s roadmap, but signaled that more features were coming.
“We have some things that we think are pretty bold in terms of really speaking to patterns that we’ve seen throughout our history having to do with communities … but also with customer service and making all those activities a whole lot easier on Twitter,” he said in his first call since being named permanent CEO.
Driven in part by growth in video ad dollars, 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 a share, in the third quarter. That was better than the loss of 27 cents a share that analysts estimated.
Excluding certain expenses, the company earned 10 cents a share. Analysts expected per share earnings of 5 cents.
Dorsey became Twitter’s interim CEO in July after Dick Costolo stepped down from the position. Dorsey was named to 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.
“Given the amount of time that he’s been in the role, I think it’s really about setting the path for success versus actually expecting monumental MAU (monthly active users) growth,” said Erna Alfred Liousas, an analyst with Forrester Research.
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 release 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.
But Twitter executives also said that there were more video ad tools on the way and for the first time they were making money from users who were not logged into the site.
“There’s still opportunity. I wouldn’t knock them out of the field just yet,” Alfred Liousas said.
Contact Queenie Wong at 408-920-2706. Follow her at Twitter.com/QwongSJ.
