Twitter shares fall on revenue forecast, anemic user growth

Tue Oct 27, 2015 7:20pm EDT
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By Yasmeen Abutaleb

SAN FRANCISCO (Reuters) - Twitter Inc gave a disappointing revenue forecast and reported slower user growth than expected, pushing shares of the microblogging company down about 13 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 Inc's Instagram and Messenger apps.

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. But analysts said it could be due to anemic user growth and Instagram's advertising share growth after opening up its platform to all advertisers in September.

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 since Jack Dorsey returned in early October as its permanent chief executive. As interim CEO in the prior quarter, he delivered a downbeat view of Twitter'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 PureFunds CEO Andrew Chanin, 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 invested in top priority products that they did not identify.   Continued...

A portrait of the Twitter logo in Ventura, California December 21, 2013. REUTERS/Eric Thayer