Twitter Dives 21% After New Content Rules Limit Users

Investors pummeled Twitter Inc.’s stock in Friday trading as the company reported that user growth had turned negative, even as its quarterly results beat Wall Street expectations on the top and bottom lines.

Twitter shares TWTR, -20.54% fell 21% during Friday’s regular session to close at $34.13. Before Friday’s losses, the stock had gained roughly 80% this year, while the S&P 500 index SPX, -0.66% climbed 6.1%. Twitter’s Friday decline was even greater that the near 20% loss Facebook Inc. FB, -0.78%   shares suffered after that company’s “nightmare” guidance issued by executives on its Wednesday earnings call, though Twitter’s market cap loss of $6.6 billion paled in comparison to Facebook’s $120 billion decline.

Twitter said its non-GAAP earnings for the three months ending in June came in at 17 cents a share, a figure that matched the consensus forecast. Total sales rose 24% to $711 million, the company said, topping the Street forecast of $696 million. Ad sales, which comprise the bulk of the group’s revenues, were 23% higher from the same period last year at $601 million. The average number of monthly active users fell by 1 million from last year 335 million, a figure fell short of expectations and the company noted that operating expenses would continue to rise over the next two quarters.

“Our second quarter results reflect the work we’re doing to ensure more people get value from Twitter every day,” said CEO Jack Dorsey. “We want people to feelsafe freely expressing themselves and have launched new tools to address problem behaviors that distort and distract from the public conversation.”

“We’re also continuing to make it easier for people to find and follow breaking news and events, and have introduced machine learning algorithms that organize the conversation around events,beginning with the World Cup,” he added. “These efforts contributed to healthy year-over-year daily active usage growth of 11 percent and demonstrate why we’re investing in the long-term health of Twitter.”

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