The San Francisco-based company reported revenue of $710 million, up 48% year over year, and earnings of 16 cents per share. Analysts surveyed by Thomson Reuters were expecting Twitter to earn 12 cents a share on $709.9 million in revenue.
The social media company provided guidance of first-quarter revenue between $595 and $610 million with EBITDA between $150 and $160 million.
That's all fair and well, but what analysts are really concerned about is the stagnant user growth. Twitter gained no new monthly active users (MAUs), and excluding SMS Fast Followers, actually lost 2 million monthly active users, for a total of 305 million users. This is a "clear negative for sentiment," SunTrust analyst Bob Peck wrote in a note Thursday morning.
Twitter is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
"We are clearly disappointed with the company's failure to grow its user base at a very critical point in its history," said Cramer and research director Jack Mohr. "The bottom line: The market cares about user growth and Twitter hasn't proven its ability to deliver."
Exclusive Look Inside:
You see Jim Cramer on TV. Now, see where he invests his money and why Twitter is a core holding of his multi-million dollar portfolio.
Though Twitter was quick to note that it is already seeing January MAUs "bounce back to Q3 levels," the flat growth this quarter was bad news for investors. Dorsey did mention a number of ways the company plans to fix "broken windows and confusing parts" to help make the platform more attractive for new users, but it will certainly take time for those effects to show up in the MAU numbers.
"Early indications suggest user retention, engagement, and new-user acquisition have benefited from some platform changes and product integrations (i.e., Periscope, auto-play video), but we believe sustained user growth is necessary to determine if these can be deemed successful," Baird analyst Colin Sebastian wrote in a note Thursday morning. "From an advertiser perspective, over the long haul, Twitter must gain scale (users and ad inventory) in order to justify further allocations of ad budgets."
During the earnings call, Dorsey outlined a specific game plan for the company, listing five priorities: refine the core service and making it more intuitive, invest in live streaming video, help creators and influencers connect with Twitter's audience, make Twitter safer and support developers to grow their businesses on Twitter.
But until that strategy results in actual user growth, analysts aren't going to hold their breath.
"We thought this earnings call helped instill confidence around focus of the management team, outlook for user growth, and advertising revenue," Canaccord Genuity analyst Michael Graham wrote in a note Thursday morning. "While it will likely take time and execution for investors to return to the stock, the revenue growth rate and margin profile seem attractive relative to the valuation. If MAUs never recover, then surely the stock has another leg down ahead. However, we continue to believe that with any momentum on MAUs, the stock should recover sharply."