Twitter shares fall on disappointing revenue forecast

Twitter Inc gave a disappointing revenue forecast and reported slower user growth than expected, pushing shares of the microblogging company down more than 10 percent.

The forecast, which came even as Twitter beat third-quarter profit and revenue estimates, suggested that more time is needed for a turnaround as social media competition grows from the likes of Facebook and Instagram.

Twitter on Tuesday forecast fourth-quarter revenue of $695 million and $710 million, well below analysts' average estimate of $739.7 million according to Thomson Reuters I/B/E/S. Executives on a conference call gave no reason for lowering the forecast.

Twitter had 320 million average active monthly users in the third quarter, up from 316 million in the prior quarter, missing analysts' expectations of 324 million.

This is Twitter's first earnings report with Jack Dorsey as its permanent chief executive. As interim CEO in the prior quarter, he delivered a downbeat view of the company's earnings and criticized its product lineup.

"People that were making a huge bet on Dorsey shaking things up within five months of being there may be disappointed," said Andrew Chanin, CEO of PureFunds and a Twitter shareholder.

"With a company like Twitter, there's a huge risk to making any big changes."

Executives said savings from staff cuts would be used to invest in top priority products that they did not identify.

"We're still hiring and investing in talent in ways that specifically serve our priorities," Dorsey told investors on the conference call after the earnings report.

Since becoming permanent CEO earlier this month, Dorsey has launched Moments, which showcases Twitter's best tweets and content; laid off more than 300 employees; given back a third of his stock, about 1 percent, to employees; and hired former Google Inc executive Omid Kordestani as executive chairman.

Video advertising helped push up advertising sales, Chief Operating Officer Adam Bain said. Twitter surpassed 100,000 active advertisers during the third quarter and began making money from logged out users, or those without accounts who visit the site, he noted.

Twitter executives spent much of the call touting Moments, which they said has made the website easier to use and helped improve user experience. However, they did not say whether it had helped drive user growth or engagement.

Twitter will air its first TV commercial during the World Series on Tuesday night.

In the second quarter, Twitter's number of monthly average users grew at the slowest pace since it went public in 2013.

The company said revenue rose 57.6 percent to $569.2 million in the quarter.

Net loss narrowed to $131.7 million, or 20 cents per share, in the quarter ended Sept. 30 from $175.5 million, or 29 cents per share, a year earlier.
Excluding items, it earned 10 cents per share.

Analysts had expected a profit of 5 cents per share on revenue of $559.4 million, according to Thomson Reuters I/B/E/S.
Twitter shares fell about 11 percent in extended trading after closing at $31.34 on the New York Stock Exchange.