SAN FRANCISCO (Reuters) - Twitter Inc (TWTR.N) halted a slowdown in user-growth in the second quarter with the help of product tweaks and services built around the summer’s World Cup, assuaging concerns for now that the online messaging service had peaked.
Shares of the company soared 35 percent on Tuesday after it reported monthly active users had risen a better-than-expected 24 percent, chalking up what would be its largest gain in a single day and adding almost $7 billion to its market value.
Twitter, which has battled to reverse a steady decline in its once-heady pace of growth, surpassed targets for virtually every metric Wall Street scrutinizes. Expectations had subsided ever since the company stunned investors in February with disappointingly low user growth.
Before Tuesday’s after-hours surge, Twitter had lost about 40 percent of its market value since the start of 2014. The company now needs to demonstrate several quarters of respectable growth before investors can again back the 10-year-old company’s growth story, analysts said.
“The expectations going in had become quite low,” said Sterne Agee analyst Arvind Bhatia. “Even in the U.S. their performance was good. For now, that will put to rest some of the concerns about U.S. growth.”
“One would still have to say that the jury is still out,” Bhatia said. “You have to look maybe at what happens in the next quarter and see if they can continue to have upside on the user growth.”
Twitter saw users increase to 271 million, still dwarfed by rival Facebook Inc’s (FB.O) 1.3 billion. Wall Street analysts had been expecting a pace of growth closer to 21 percent.
Timeline views, a measure of the engagement of its users, also exceeded expectations with a 15 percent increase, far outpacing the roughly 8 percent expected.
Twitter, whose rapid-fire format has proven popular as a companion to major global events, may have enjoyed a boost from the World Cup. The world’s most popular sporting event peaked with the finals in July.
Chief Executive Dick Costolo said in a conference call with analysts on Tuesday that the football tournament led existing users to spend more time on Twitter but did not contribute to the rise in new users during the quarter.
For the current quarter, Twitter is forecasting revenue of $330 million to $340 million, outpacing forecasts for around $323.7 million, according to analysts polled by Thomson Reuters I/B/E/S.
Its shares jumped to $51.20 in extended trading, from a close of $38.59 on the New York Stock Exchange.
User growth has stagnated since Twitter went public to much fanfare in November. Yet it remains valued at almost 200 times earnings, based on bullish investors’ belief it can eventually transform itself into an Internet platform on the same scale as Facebook.
Incoming Finance Chief Anthony Noto set expectations high on Tuesday, telling analysts that he believed Twitter can build the “largest audience in the world.”
Twitter executives noted several times on the call that the service’s reach is greater than its 271 million monthly users, citing hundreds of millions of other people who visit the website or are exposed to Twitter content without being logged in to the service.
Some investors argue its reported user numbers do not fully reflect engagement, particularly with media viewers. Others say its inherently complex format deters wider adoption.
At its peak, Twitter enjoyed a $46 billion capitalization on $665 million of revenue in 2013, making it at the time one of the world’s priciest stocks.
But in past few months, Twitter has granted more prominent placement to photographs to liven up its interface, simplified the sign-up process, and allowed ads touting mobile-app installations to drive up revenue.
It reported a 124 percent jump in quarterly revenue to $312 million, beating expectations for $283.1 million. It posted non-GAAP net income of $14.6 million or 2 cents a share, reversing a loss of $16.4 million or 12 cents a share a year earlier.
Reporting by Edwin Chan; Editing by Leslie Adler, Bernard Orr