Twitter shares plummet as first-ever earnings show weak growth

Promises to win more users in 2014 ... somehow

Twitter has reported its quarterly earnings for the first time since its initial public offering in November, but the results hardly came as birdsong to investors' ears.

Twitter CEO Dick Costolo described the period ending on December 31 – Twitter's fourth fiscal quarter – as "our strongest financial quarter to date," and revenues were indeed up. But Twitter has yet to earn a profit and its user growth figures for the quarter were disappointing.

Total revenues for the quarter were $242.68m, which represented more than a third of the $664.89m that Twitter earned throughout its fiscal 2013.

Revenues were up 116 per cent from the fourth quarter of 2012, and Twitter's annual revenues for 2013 were likewise up 110 per cent from the previous year.

But the microblogging site is hardly minting money. It posted a loss for the quarter of $511.47m and an annual loss of $645.32m.

Granted, most of that can be chalked up to IPO-related overhead, including a $521m charge for stock-based compensation expenses. But even ignoring those charges, Twitter only earned a measly $9.77m in the fourth quarter, and it lost $34.33m for fiscal 2013 as a whole.

It did manage to post earnings of $0.02 per diluted share for Q4, however, when the analysts were expecting it to report a loss of about the same amount.

But Twitter's usage figures showed cause for concern. The company reported that it saw 241 million monthly active users during the quarter, which it said was up 30 per cent, year-over-year. But Twitter's S-1 filing with the US Securities and Exchange Commission last year showed that it already had 218.3 million monthly active users as of June 30, meaning it only increased its user base by 9.6 per cent during the last half of 2013.

Of those monthly active users, 76 per cent or 184 million accessed Twitter from mobile devices, which the company said was up 37 per cent from the year-ago period. But here, too, investors could have hoped for stronger growth, because 75 per cent of Twitter's advertising revenue comes from mobile ads.

Twitter measures user engagement by counting the number of times users view timelines of conversations. The company served up 148 billion timeline views in the fourth quarter, which was a 26 per cent increase over the previous year's quarter but was actually down 7 per cent sequentially.

In a conference call with analysts on Wednesday, Costolo said that Twitter would "double down" in 2014 to accelerate the growth of its core user base.

"In the past, growth was something that happened to us," Costolo said, adding that Twitter plans to make a variety of functional changes to its products to make them more attractive to more people.

But investors on the whole were unimpressed. Twitter's stock closed down slightly on Wednesday, then entered a serious dive that knocked another 12 per cent off their value in after-hours trading. ®