Twitter’s revenue almost doubled in the fourth quarter compared with a year earlier, but that increase was overshadowed by the company’s slowing user growth.
The company announced its numbers after the close of Thursday's regular stock trading session, during which the company's shares closed up 54 cents, or 1.3%, at $41.26.
The social media firm recorded revenue of $479 million, up 97% from $242.6 million in the fourth quarter of 2013. However, Twitter's number of worldwide monthly active users rose to 288 million, up only 2% from the previous quarter. That came in below even a sober consensus prediction by stock analysts.
“While revenue and profitability are important, we believe the focus remains on user growth -- arguably the most important metric for business -- and engagement,” Wedbush Securities analyst Shyam Patil said in a report about Twitter’s earnings.
On the bottom line, the company posted a loss in the latest period. That’s not unusual for young, growing companies. But investors are increasingly concerned that Twitter’s advertising business won’t produce enough cash flow to justify the company’s stock price if user growth continues to flag.
“The real numbers we were looking at were the user numbers, and those were pretty poor,” said Nate Elliot, an analyst at Forrester Research. “These are the numbers Twitter needed to move. It appears they just can’t seem to find anyone else out there who is interested in using Twitter.”
The micro-blogging service, once widely regarded as the No. 2 social media platform, after Facebook, was recently surpassed in monthly active users by Instagram, which now has more than 300 million monthly active users.
The company is trying to expand Twitter posts to other platforms, making recent deals with Flipboard and Yahoo Japan. It's planning a "logged out" homepage so people who aren't yet on Twitter might be encouraged to sign up. The company also announced a deal that gives Google better access to its tweet streams so tweet results show up higher and more frequently on Google searches.
That last news may be responsible for a Twitter stock runup on after-hours markets.
Still, nothing it's tried so far has sparked the user growth it needs to satisfy long-term investors.
“I can’t imagine anyone at Twitter is happy about these numbers,” Elliot said.