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Twitter admits 'unacceptable' failure to attract new users as shares tumble 7% - despite it beating revenue and earnings

Company has only attracted 2 million new users in last quarter
'This is unacceptable and we're not happy about it,' said Jack Dorsey
Firm is still looking for new CEO following departure of Dick Costolo

Published: 17:57 EST, 28 July 2015 | Updated: 19:08 EST, 28 July 2015

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Twitter's quarterly earnings and revenue blew past expectations, but its monthly average user number grew at its slowest pace since it went public in 2013, and its shares fell about 7 percent after hours.

'We do not expect to see sustained meaningful growth in maus until we start to reach the mass market,' Chief Financial Officer Anthony Noto said, referring to monthly active users of the microblogging service.

The company said on Tuesday it had 304 million core users in the second quarter, up from 302 million in the prior quarter - raising concerns it will never become mass market like Facebook.

The company said on Tuesday it had 304 million core users in the second quarter, up from just 302 million in the prior quarter.

Twitter also 'remains too difficult to use,' Noto said in the call, which was broadcast on Twitter's live-streaming service Periscope.

'This is unacceptable and we're not happy about it,' Jack Dorsey, who stepped in as interim chief executive on July 1, said on a call with analysts.

Twitter said revenue rose 61 percent to $502.4 million.

Excluding the impact of a strong dollar, revenue rose 68 percent.

The company's net loss narrowed to $136.7 million, or 21 cents per share, in the second quarter ended June 30 from $144.6 million, or 24 cents per share, a year earlier.

Excluding items, Twitter earned 7 cents per share.

Analysts on average had expected Twitter to earn 4 cents per share on revenue of $481.3 million, according to Thomson Reuters I/B/E/S.

Twitter estimated full-year revenue of $2.20 billion-$2.27 billion, up from its previous forecast of $2.17 billion-$2.27 billion.

Last quarter, it lowered its full-year revenue forecast after weak demand for its direct-response ads, which prompt users to take actions such as clicking on a link to an advertiser's website or downloading an app.

Twitter is also in the midst of a management change after Chief Executive Dick Costolo abruptly announced in June that he was stepping down.

After the bell, Twitter shares extended losses and were down about 7 percent at around $34, after closing at $36.54 on the New York Stock Exchange.

The beleaguered company is searching for a permanent CEO to replace Dick Costolo, who stepped down at the beginning of this month. Co-founder and chairman Jack Dorsey is serving as interim CEO.

Dorsey said Tuesday that while the results show 'good progress in monetization,' the company is 'not satisfied' with the growth of its audience.

On average, Twitter had 316 million monthly active users in the second quarter, up 15 percent year-over-year but up less than 3 percent from the first quarter of this year.

Twitter's finance chief, Anthony Noto, said in a conference call that the company doesn't expect to see 'sustained, meaningful growth' of its user base until it reaches the mass market.

He did not say when that would be, only that it would take a considerable amount of time.

The beleaguered company is searching for a permanent CEO to replace Dick Costolo, who stepped down at the beginning of this month. Co-founder and chairman Jack Dorsey is serving as interim CEO.

While many people are familiar with Twitter, the company has not been able to convince people that they need it.

The assessment hammered Twitter's stock in after-hours trading. After jumping in the first minutes following the release of the earnings report, the stock did an about-face and shed more than 10 percent to $32.88.

San Francisco-based Twitter Inc. posted a loss of $136.7 million, or 21 cents per share, in the April-June period. That compares with a loss of $144.6 million, or 24 cents per share, a year earlier.

Adjusted earnings were 7 cents per share, above the 5 cents that analysts surveyed by Zacks Investment Research had expected.

Revenue jumped 61 percent to $502.4 million from $312.2 million. Analysts had expected lower revenue of $487.4 million.

User growth has been an ongoing challenge for Twitter, as it tries to make its service a widely used product rather than a niche short-messaging service popular with journalists, celebrities and young people.

For the current quarter ending in September, Twitter said it expects revenue in the range of $545 million to $560 million. Analysts surveyed by Zacks expected revenue of $563.9 million.

The company expects full-year revenue in the range of $2.2 billion to $2.27 billion.

Twitter had no updates on its CEO search.

Twitter shares have increased roughly 2 percent since the beginning of the year, and have been trading near a 52-week low. They closed Tuesday at $36.54, a decline of nearly 4 percent in the last 12 months.