Twitter Narrows Loss, Adds Users and Misses Revenue Forecast

For all the issues that Twitter has grappled with over the last few years — the slowdown in user growth, a revolving door of executives and confusion over how to use the social media service — it has had one constant pillar of strength: a bulletproof advertising business.

Now add that business to Twitter’s growing list of problems.

On Tuesday, Twitter reported revenue of $595 million for the first quarter — which was below Wall Street estimates — and said that marketers were not spending as quickly on ads on the service as it had anticipated. That trend line may not reverse anytime soon; the company, based in San Francisco, is also projecting sales in the second quarter that are below analyst expectations.

The numbers punctuated an earnings report that showed the depth of Twitter’s challenges. The number of people joining the service continues to be modest, even after a battery of experiments by the company to lure new users. And Twitter remains unprofitable, reporting a first-quarter net loss of $80 million, or 12 cents a diluted share, though that was narrower than the $162 million loss from a year earlier.

The results add to the obstacles facing Jack Dorsey, a founder of the company who was reappointed chief executive last year and who vowed to turn it around. To do so, he restructured the board, replacing longtime members with new additions. He made sweeping changes in engineering and product, appointing new leaders as some veteran executives departed. In October, he cut more than 300 jobs, or roughly 8 percent of the work force.

Yet over the last year, Twitter’s stock has plunged about 65 percent. After the earnings report on Tuesday, investors sent the company’s shares down more than 12 percent in extended trading.

“Brand advertisers have been Twitter’s bread and butter for years,” said Debra Aho Williamson, an analyst for eMarketer, an industry research firm. “To hear the company say that it’s struggling to increase revenue from these types of companies is a concern.”

On Tuesday, Mr. Dorsey was relatively quiet on an earnings call with analysts, though he said he was intent on improving Twitter so it was easier to use. He also emphasized Twitter’s focus on live events — particularly using its Periscope streaming video application — to sell the power of the “live” nature of the network to its advertisers. Twitter reached a deal with the National Football League to livestream 10 Thursday night football games on Twitter this season, for example.

Other Twitter executives did not shy away from the company’s first-quarter sales performance. For the last five or six years, Twitter’s ad business has been a huge driver for the company: Growth rates regularly exceed 60 percent. For the first quarter, sales were up 36 percent from a year earlier; they were estimated to rise as little as 17 percent in the second quarter.

Adam Bain, Twitter’s chief operating officer, said that video advertising was strong for the first quarter, but added that the results were hurt because advertisers did not spend as much on older advertising products, like promoted tweets, as the company anticipated. He said that negative press reports about Twitter were not having an effect on advertisers.

“Let’s be perfectly clear on the reason — demand was weaker than we thought,” Anthony Noto, Twitter’s chief financial officer, said in an interview, referring to the company’s revenue. He added that the market for Twitter’s older advertising products was still sizable, though that could be threatened if the weak demand continued.

Twitter faces tough advertising competition from other social media companies like Facebook, which is expected to capture more than 31 percent of advertiser digital spending in the United States this year, according to data from eMarketer. Other companies, like Snapchat, also compete with Twitter for ads.

Twitter’s user growth, which has been the company’s prime area of concern since its 2013 initial public offering, improved in the first quarter — though the growth remained modest. The company said it had an average of 310 million monthly users in the first three months of the year, up from 305 million users in the last three months of 2015.

The 305 million figure excluded so-called fast followers who use a text-message version of the service. The company no longer includes fast followers in its user numbers. A year earlier, Twitter posted the total users at 302 million.

The 310 million monthly visitors is more than some analysts had expected, a boost that the company attributed to seasonal additions and an increase in marketing.

But those figures come with a caveat. Most of that growth came from outside the United States and from markets that were less mature and, therefore, less financially lucrative for Twitter.

“The domestic number — the one that everyone cares about — it’s not growing,” said Rich Greenfield, a media and technology analyst at BTIG Research, an industry firm. “They’ve just literally banged into a wall.”