Twitter Inc (TWTR) Reports Upbeat Quarterly Earnings, Stock In Green

Tuesday’s earnings report is the first since Twitter cofounder Jack Dorsey stepped in as interim CEO, replacing Dick Costolo who announced his resignation in June.

Twitter Inc. said second-quarter revenue grew 61%, a reassuring sign that its advertising business is working its way past a temporary hiccup.

U.S. revenue totaled $321 million, an increase of 53% year-over-year.

But Twitter still faces a user growth problem, reporting that average monthly active users were up 15 percent year-over-year to 316 million. Profit in the second quarter was 7 cents a share, compared to Wall Street’s estimated 5 cents a share.

Some analysts think that it’s unlikely that Dorsey will become the company’s permanent CEO because he’s signaled he wants to keep leading the mobile payment startup Square, which is reportedly preparing to go public. In last year’s second quarter, the micro-blogging platform posted earnings of 2 cents per share and $312 million in revenue.

How can a company like Twitter, that seems so successful, be having such problems? The reported revenue is also higher than the management’s previously provided guidance range of $470-485 million. Axiom Capital analyst Victor Anthony succinctly captured the mood on Wall Street in a note, saying sentiment on Twitter shares is “very negative”.

But with Twitter, most eyeballs are usually scanning and honing in on another figure: user growth. Also last month, it rolled out Project Lightning, a new, curated way for people to see tweets even when they aren’t logged on. According to eMarketer, as much as 90% of Twitter’s ad revenues will come from mobile devices in 2015, up from 84.6% in 2014.

Despite the upbeat results, Twitter CEO Jack Dorsey didn’t appear satisfied, as he stated in the press-release: “Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience…In order to realize Twitter’s full potential, we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter’s value faster, and better communicate that value”.