Twitter Stock Tanks on Flat User Growth

Jack Dorsey - H 2015
AP Images

Jack Dorsey - H 2015

The company reported 320 million monthly active users, the same as it had during the third quarter.

Twitter continue to have a user growth problem. 

The company on Wednesday reported 320 million monthly active users (MAUs) during the fourth quarter, flat from the third quarter but up 9 percent year-over-year.

Not including the small percentage of people people who tweet via text message, Twitter actually declined from 307 million MAUs during the third quarter to 305 million MAUs during the fourth quarter. 

"We saw a decline in monthly active usage in Q4, but we've already seen January monthly actives bounce back to Q3 levels," the company said in a prepared shareholder letter. "We're confident that, with disciplined execution, this growth trend will continue over time." 

Despite the company's attempt to spin its growth numbers, Twitter stock dropped nearly 12 percent during after-hours trading before settling down around 5 percent.

The social media company reported fourth quarter revenue of $710 million, in line with what Wall Street was expecting. Adjusted earnings for the quarter came in at 16 cents per share, up from the expected 12 cents per share.

Twitter has been struggling to make itself more attractive to users beyond its core base of journalists, celebrities, sports figures and other influencers. 

To that end, the company has introduced several new features to attract new users, including Wednesday's rollout of a redesigned timeline that surfaces the "best tweets" ahead of the chronological timeline. It comes after the introduction of Moments, which curates a collection of tweets around specific events or topics. 

Meanwhile, Twitter CEO Jack Dorsey — who took over for Dick Costolo last year — has seen the departure of a number of top executives and will be expected to give an update about his plans to replace them during the company's conference call with investors.

The company letter states that Twitter has "spent the last six months structuring the organization and our leadership team to move with greater agility and focus, reviewing the state of our services and strategy, learning from what we've shipped and developing a stronger point of view about what we are and what we want to be."

It continues that the company is focused on live commentary, live connections and live conversations. "We believe we can become the first screen for everything that's happening now," the letter states. 

Twitter is also expected to name as many as two new board members. 

One bright spot for the company is its revenue growth. Twitter brought in $641 million in advertising revenue during the quarter, up 48 percent year-over-year. Mobile advertising revenue made up 86 percent of total ad revenue. 

Twitter shares, which hit their lowest closing price ever on Tuesday, closed Wednesday up nearly 4 percent to $14.97 on the timeline news. 

More to come.