Shares of Twitter Inc. (NYSE:TWTR) initially soared on Wednesday after it reported first-quarter earnings boosted by advertising revenue that beat Wall Street analyst expectations. However, things unraveled quickly for the stock after management tamped down excitement over Twitter’s nascent turnaround by offering a bleak outlook for growth.
Twitter, initially up 5% in premarket gains on earnings, flipped to a 4% fall on the day.
On a conference call with analysts Wednesday, Twitter CEO Jack Dorsey said he expects Twitter to be profitable, but cautioned that it was still working through a business recovery it started last year.
The company also indicated ‘difficult comps’ in second half and increased competition.
"We're also facing tougher comps in the second half of this year as we lap the beginning of our strong business recovery that began in Q3 of last year," Twitter CFO Ned Segal said during a conference call.
"Sequential revenue growth for the rest of this year will look like 2016 because of tougher comparables," he added.
Twitter is one of several social media firms with the potential to face greater user and regulatory scrutiny in the wake of Facebook Inc.’s (NASDAQ: FB) Cambridge Analytica data privacy scandal. Dorsey fielded multiple questions about the impact that it could have on Twitter's business.
READ: Twitter users worldwide experience unexplained outage
Dorsey stressed Twitter is "different from our peers" because its data business is built on information that users share publicly, rather than privately.
"Our data business just organizes that public data in real-time," Dorsey said. "We do not provide any personally identifiable information that is not already visible on the service."
Twitter reported net income of US$0.16 per share on revenue of US$664.9mln. The consensus earnings estimate was US$0.11 per share on revenue of $609.9mln, according to Earnings Whisper.
It was the company's second straight profitable quarter. Twitter has benefited due to increased advertising revenue, especially due to digital advertising budgets increasing as companies shift ad money over from television.
"Our message is really resonating with advertisers," Segal said on CNBC. "Sentiment is much better, the ROI that they are seeing from their advertising on Twitter is much better based on lower cost per engagement and more ad engagement."
Twitter beat monthly active user (MAU) projections, hitting 336 million at a growth rate of 6% year over year.
-- Updates for additional info, CEO and CFO comments