Wall Street to Twitter: Users are more important than revenue

Wall Street to Twitter: Forget the money. Just show us the users.

Twitter topped Wall Street’s expectations Tuesday, thanks to a 61 percent surge in revenue, but disappointed when it came to user growth.

After sending the stock up 5 percent following the release of the results, investors backpedaled in after-market trading, sending Twitter down more than 11 percent.

The reversal came during an earnings call in which Jack Dorsey, Twitter’s interim CEO, called the results posted by the social networking platform “unacceptable.”

Adding to investor concerns was CFO Anthony Noto’s warning that the user turnaround anticipated by many wasn’t even in sight.

“We do not expect to see sustained meaningful growth in [monthly active users] until we start to reach the mass market,” he said.

Twitter’s MAU count of 316 million — up only 2.5 percent from the previous quarter — was so disappointing, it took precedence over the impressive gains recorded for the company’s top and bottom lines.

Indeed, second-quarter revenue of $502 million, up 61 percent, blew past the Street’s consensus of $482 million. Diluted net earnings per share of 7 cents also trumped analyst expectations of 4 cents.

After initially embracing these financials — and only later focusing on such fundamentals as MAU — investors realized that Twitter’s growth cannot be sustained without corresponding user gains.

Word from management on this front, while honest, was less than comforting.

Noto acknowledged that Twitter had failed to keep users and to entice new ones.

And through research, he said, the company had identified its two biggest problems: Too many people don’t know why they should use Twitter, and too many can’t figure out how to use it.

The company must advance beyond “early adopters,” he said.

On a brighter note, Twitter reported it was about to sign its 100,000th advertiser in a universe that could ultimately be millions. It also kept its high-end outlook for full-year revenue at $2.27 billion and bumped up its high-end Ebitda forecast to $540 million.

But as for the day’s burning question of who will be picked as permanent CEO after Dick Costolo’s exit this month, Dorsey said, “We don’t have an update to provide today.”