Twitter Inc. failed to attract more monthly viewers in the second quarter, spooking investors looking for evidence that the company is on a sustainable long-term growth path. The shares tumbled more than 9 percent in early trading, even as quarterly revenue topped analysts’ projections.
A long-term turnaround depends on Twitter expanding its audience. That number stands at 328 million monthly active users -- the same as in the prior quarter, the San Francisco-based company said in a statement Thursday. Revenue fell 4.7 percent and the company’s net loss also widened, affected by a $55 million writedown of the value of its investment in SoundCloud, the German music streaming service.
Twitter is still working to prove that it can build a sustainable, growing business. After hitting a plateau with its user base and struggling with a slowdown in sales, the company started narrowing its focus, shuttering businesses and teams that didn’t fit its goal of being a destination for live-event content. With a goal of reaching profitability, Twitter began investing heavily in video, aiming to draw a more mainstream set of users and premium advertising deals. The network now has a promising set of partnerships in its pipeline, but some investors are skeptical that Twitter will ever be much bigger than it is today.
“It’s a niche platform,’’ said Brian Wieser, an analyst at Pivotal Research. “It always was and always will be.’’
Though its monthly audience failed to grow, Twitter said there’s room for optimism because 12 percent more users are visiting the site on a daily basis than in the same quarter last year. The company declined to disclose a daily active user number or provide further details. But Twitter also said that it doesn’t expect its overall sales growth to improve in the second half, citing “headwinds” related to products it’s de-emphasizing.
The company reported a net loss of $116.5 million, or 16 cents a share. Revenue dropped to $573.9 million, though that beat analysts’ average estimate of $537.2 million as the company drew more money from video advertising and its business selling data to third parties.
In the third quarter, Twitter said it expects adjusted earnings before interest, tax, depreciation and amortization of $130 million to $150 million. The average analyst estimate was $144.1 million.
Twitter’s business troubles contrast with its increased profile in the political world, as U.S. President Donald Trump frequently uses the platform to reach the public in an unfiltered manner.
Amid heated political conversations, users have criticized Twitter for its handling of abuse and harassment on the site. The company has worked to improve its process for responding to reports. The company reported a 10-fold increase in the amount of accounts it “takes action on” each day.
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