Twitter’s Business Shrinks, but Investors See a Glimmer of Hope

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Twitter headquarters in San Francisco. The company added nine million users in the first quarter. Credit Justin Sullivan/Getty Images

More than a year into Twitter’s efforts to turn around the company under the leadership of Jack Dorsey, its business is shrinking. And yet, investors seem to have finally been given a glimmer of hope for the future.

But first, the bad news.

On Wednesday, Twitter reported its first fall in revenue since its initial public offering in 2013, posting sales of $548 million in the first quarter, down 7 percent from a year earlier.

But that beat investors’ low expectations for the company, as Wall Street analysts had predicted revenue of $509 million.

Twitter also surprised investors in another crucial area, adding nine million users in the first quarter, for a total of 328 million active users monthly. That is a 6 percent increase from the previous year, and the largest quarterly net increase in new users since early 2015.

Investors took kindly to the news, and Twitter shares rose 12 percent to $16.34 in pre-market trading.

“We’re delivering on our goal to build a service that people love to use, every day, and we’re encouraged by the audience growth momentum we saw in the first quarter,” Mr. Dorsey, the Twitter chief executive, said in a letter to investors. “While we continue to face revenue headwinds, we believe that executing on our plan and growing our audience should result in positive revenue growth over the long term.”

It is a bright spot of news for the beleaguered company, which was founded 11 years ago and has struggled to maintain growth even as other social media companies, including Facebook, Instagram and Snapchat, have seen their popularity and user numbers surge.

Twitter has also had to contend with Facebook mimicking some of its strengths — like providing a platform for breaking news and celebrity influencers — at the same time it has struggled to convince advertisers that its 140-character messaging service is the best place for people to see what’s happening in the world at a given moment.

Under Mr. Dorsey, Twitter has sought to find ways to make its service more attractive to mainstream audiences. He has warned investors that turnarounds take time, and he has appointed new heads of product and engineering to assist him in overhauling the company.

The goal for Twitter is to translate its enormous impact on media and culture, and the preferred means for President Trump to communicate, into a booming business, something that has eluded it so far.

“By Wall Street standards, Twitter’s a diving joke. A company that’s hit a financial wall with no obvious upside,” Bob Lefsetz, a media industry analyst, said in his morning newsletter to subscribers. “By cultural standards, it’s a juggernaut, far exceeding the impact of Facebook and Snapchat, even Instagram.”

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