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Despite record profit, Wall Street won’t reward Twitter unless it keeps growing

Reuters/Kacper Pempel
Out of the shadows.
By Simone Stolzoff
Published Last updated This article is more than 2 years old.

Twitter reported its second-quarter earnings today (July 27), its third profitable quarter in a row. But a decline in its user count sent the social network’s stock price nosediving in pre-market trading.

The social network exceeded estimates of analysts surveyed by Thomson Reuters—it generated $711 million for the quarter, compared to an expected $696 million. But the number of users who visit the site each month fell short of expectations: Analysts had expected Twitter to grow to more than 338 million monthly active users, whereas the social network only reported 335 million for the quarter, a drop of 1 million users over last quarter.

The second quarter was eventful for Twitter. The company made a concerted effort to remove fake accounts, comply with new privacy regulations from the European Union, and host public discourse around timely events like the World Cup.

CEO Jack Dorsey told investors that the effort to clean up the platform will ”enable long-term growth as we improve the health of the public conversation on Twitter.” But the market responded to the platform’s lack of user growth above all else: At the time of publishing, Twitter’s share price was down roughly 14% in early market trading from yesterday’s closing price of $42.94.

Twitter’s user woes overshadowed what otherwise might have been the latest chapter in a comeback story for the social network and Dorsey, who took back over as CEO in 2015. One year ago today, Twitter stock was trading for less than $17.

Revenue growth this quarter was also impressive, with a 24% increase over the same quarter last year.

On Wall Street, however, growth is the name of the game. Similar to rival Facebook, whose lack of user growth caused the social network to lose more value than any other publicly traded US company in a single day ever yesterday (July 26), Twitter must continue to find ways to grow its user base if it wants to impress investors.

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