Twitter Inc. added more users in the latest quarter but said its pace of revenue growth slowed sharply because of technical bugs that hurt its advertising business.
The Wall Street Journal reports shares plunged roughly 20% in premarket trading Thursday as revenue and profit in the third quarter fell short of Wall Street expectations and the company’s outlook for the current quarter trailed analysts’ forecasts.
The social-media company said the number of people who use its platform daily increased by 6 million from the second quarter to 145 million. The improvement follows changes designed to serve users more relevant content, enabling them to follow topics of interest. Analysts polled by FactSet had estimated Twitter would add roughly 3 million daily users.
Revenue rose 9% from a year ago to $824 million, marking the smallest annual increase since late 2017 and below the $873.9 million that analysts polled by FactSet were expecting. Twitter blamed software malfunctions associated with its ability to target ads and share user data with advertisers.
Third-quarter profit totaled $37 million, or 5 cents a share, down from $789.2 million, or $1.02 a share, in the prior-year period; the 2018 third quarter included a large tax benefit.
The challenges with Twitter’s advertising business was a surprise to most analysts, said Cascend analyst Eric Ross. “No one was talking about this,” he said. “The results were much worse from a revenue-peruser standpoint than we were expecting. This is shocking given the growth in daily active users.”
Earlier this week, Snap Inc. said the number of daily Snapchat users rose by seven million in the third quarter to 210 million, though that growth was smaller than the 13 million users it gained in the second quarter.
Facebook Inc. is slated to release its quarterly report next week.
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