Twitter’s share price fell more than 14% on Thursday as the news that it failed to add any monthly users in the last quarter disappointed investors following a growth surge earlier in the year.
For the second quarter, the company reported 328 monthly active users, exactly where usage was three months ago. It the high-spending U.S., monthly usage dropped from 70 million to 68 million.
Twitter beat Wall Street expectations by posting profits of 12 cents a share on revenue of $574 million for the second quarter. Analysts were expecting earnings of 5 cents a share on just $537 million in revenue.
CEO Jack Dorsey noted that monthly active usage increased 5% year-over-year and daily active usage increased 12% year-over-year, marking the third consecutive quarter of double-digit growth. “We’re strengthening our execution, which gives us confidence that our product improvements will continue to contribute to meaningful increases in daily active usage,” he said in a news release.
But in trading Thursday, Twitter shares tumbled 14.2% to $16.84. Analysts said investors were disappointed that the company hadn’t been able to sustain its first quarter, when it added about 9 million monthly users.
“The expectations certainly were that Q1 was the beginning of a new normal, and I think it’s clear that wasn’t the case,” Monness, Crespi, Hardt & Co. analyst James Cakmak told BuzzFeed News.
Buzzfeed said user growth “is critical because Twitter needs that growth to credibly challenge Google and Facebook, two giant internet companies that give marketers access to massive audiences, along with the ability [to] target with precision.”
Wall Street sees the daily usage metric as less significant because Twitter doesn’t share how many daily active users it actually has, making year-over-year growth difficult to assess. “Adding zero new [monthly] users … is not what investors were looking for,” Recode said.
Founded in 2006, Twitter has never posted a net profit on a GAAP basis and has lagged Facebook in online advertising. In the second quarter, the GAAP net loss was $116 million, compared with $107 million a year ago.