Twitter Inc. (NYSE: TWTR) reported fewer monthly active users in the three months ending in June due in part to “decisions [the company] made to prioritize the health of the platform.”
While analysts had expected a growth of 1 million users for the second quarter, the number of monthly users fell by 1 million to 335 million. The social network also addressed a possible decline of users by the “mid-single-digit millions” to around 330 million in the third quarter. Analysts had expected growth to 340 million for the quarter.
Twitter has been working to cleanse its platform by purging automated and spam accounts. Under pressure from regulators in several countries, the company is prioritizing user privacy and reducing abusive content, hate speech, and misinformation in hopes of attracting new users. In compliance with the General Data Protection Regulation, 143,000 apps were removed from the platform for violating its policies. Twitter stated in April that the new rules could “negatively impact” user growth.
On a conference call with analysts Friday, CEO Jack Dorsey said Twitter would continue to "invest heavily" in improving the health of the platform, calling it the "right thing to do" for the company and "for society as a whole.”
We believe that Twitter's value as a daily service is enhanced when the conversation on the platform is healthier and people feel safe freely expressing themselves," Dorsey said.
The stock fell 17 percent to USD 36.24 in Friday morning trading after earnings results.
Although user numbers alarmed investors, Twitter's business remains strong. Its sales hit USD 711 million for the quarter, up 24 percent from the same period a year ago, and it posted its third consecutive profitable quarter.
“Investors are overreacting to (monthly active user) trends,” BTIG analyst Richard Greenfield said about the share fall. “This is an identical overreaction that we saw in Q2 last year. Last year’s Q2 created an incredible buying opportunity in the stock.”