Twitter (TWTR) reported adjusted non-GAAP earnings of 16 cents a share for the fourth quarter of 2016, topping forecasts by 4 cents. Revenue of $717 million, however, missed Wall Street's call for $740 million in sales, fanning questions about Twitter's ability to make money from a service that has grown in prominence with the election of President Donald Trump.
Shares were down nearly 10% at midday Thursday to $16.77.
Co-founder and CEO Jack Dorsey told investors on an earnings call that Twitter is honing its social media network with artificial intelligence and machine learning to simplify the service for users and prove its value to advertisers.
"The superpower we really provide the world is we can break news and get information to people faster than anyone else," Dorsey said. The company is applying AI, he said, to ensure that Twitter remains "that little bird that told you something" you couldn't find out faster from someone else.
While President Trump's frenzied tweeting underscores Twitter's importance in politics and news, the company has struggled to
show engagement on par
) and Snapchat. Average users per month grew 4% to 319 million in the fourth quarter. The company also disclosed that its daily average users , or DAUs, increased 11% in the fourth quarter, but would not provide an absolute number for DAUs. Time spent on the app also grew by double-digit percentage points, though the company did not disclose greater detail on engagement.
While sales in the fourth quarter disappointed, Twitter's revenue increased by 14% to $2.5 billion for 2016 as a whole.
Since becoming Twitter's CEO in July 2015, Jack Dorsey has focused on rolling out video of sports, political events and other topics. The company said it streamed 600 hours of NFL games, political debates and other content to 31 million viewers in the fourth quarter.
Twitter's Jack Dorsey should be worried
The NFL streaming pact drew 3.5 million viewers per game. Twitter management said Thursday that the NFL is looking to reach a new audience, with younger viewers from diverse geographies and a greater gender split. Of those watching the NFL on Twitter, the company said, 50% were below 25.
While Twitter was pleased with the NFL streaming partnership, it was just a one-year deal, and the company could face greater competition for the contract next year. Verizon (VZ) , for instance, has a mobile video contract to carry NFL games and is in the process of acquiring the core assets of Yahoo! (YHOO) , which could bid against Twitter to carry NFL games online.
Meanwhile, Twitter's streams of the final presidential debate drew 4.2 million users. Election-night and inaugural live streams had audiences of 7.5 million and 8.6 million viewers, respectively.
As Twitter has attempted to expand its audience, it has had some trouble retaining executive talent. Recent exits include
CTO Adam Messinger
in December and COO Adam Bain in November. Just this week, the company's head of diversity announced he was leaving, and Twitter confirmed that its head of human resources had left for "personal reasons."
Part of refining Twitter's service and ad proposition has meant parting with some businesses.
"We focused all of 2016 on making sure we are aligned around that one use case of sharing what's happening before anyone else," Dorsey said. That strategy has led to shutting down
short-video service Vine
and Twitter selling its
Fabric mobile app development unit
) Google, both of which occurred in January. Dorsey noted that Google would provide support to developers that use Fabric, an important factor in selling the business.
Twitter did not provide revenue guidance for the first quarter but said it expected $75 million to $95 million in earnings before interest, taxes, depreciation and amortization. Large advertisers begin planning budgets in mid-January to February, Twitter management said. Competition for digital dollars has grown more intense, which will affect whether Twitter can hit the high end of guidance.
Meanwhile Dorsey said Twitter will apply AI and machine learning to make the service as simple as "looking out the window to see what's going on." The question remains whether enough users will like what they see to engage on the service daily, however, and whether Twitter can fight off the increasing competition for advertisers.
Facebook and Alphabet are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB or GOOGL? Learn more now.