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Twitter's 4Q results beat estimates, but stock falls amid user growth worries

FILE - In this Monday, Nov. 4, 2013, file photo, an updated phone post on the floor of the New York Stock Exchange features a Twitter logo, in New York. Twitter Inc. reports quarterly earnings on Wednesday, Feb. 5, 2014. (AP Photo/Richard Drew)

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FILE - In this Monday, Nov. 4, 2013, file photo, an updated phone post on the floor of the New York Stock Exchange features a Twitter logo, in New York. Twitter Inc. reports quarterly earnings on Wednesday, Feb. 5, 2014. (AP Photo/Richard Drew)

NEW YORK, N.Y. - Twitter beat Wall Street's earnings and revenue expectations in its first quarter as a public company. But investors were looking for even more — including faster user growth — and the company's stock dipped as much as 12 per cent in after-hours trading Wednesday.

Twitter reported a loss of $511 million, or $1.41 per share, in the October-December quarter. That compares with a loss of $8.7 million, or 7 cents per share, a year earlier. Adjusted earnings were 2 cents per share.

Twitter's revenue more than doubled to $243 million from $112 million.

Analysts, on average, had expected an adjusted loss of 2 cents per share and revenue of $218.1 million, according to FactSet.

Twitter ended the quarter with 241 million monthly users, up 30 per cent from a year earlier. That's slightly fewer than some analysts expected. Sterne Agee's Arvind Bhatia was looking for 244 million users, an increase of 32 per cent.

But compared with the end of the third quarter, Twitter's user growth is slowing down. The company added just 9 million new monthly users, a slowdown from the previous three quarters, when it was adding an average of 16 million new accounts each quarter.

Even so, "they did have growth," said Gartner analyst Brian Blau.

"Maybe that wasn't the high standard that we have come to expect from (the likes of) Facebook," he added. Besides growing its user base, Twitter "did OK on revenue" and on other fronts, Blau said.

"They have good business standards."

CEO Dick Costolo sought to be reassuring during the company's conference call with investors and analysts. He said changes Twitter made to the short messaging service during the fourth quarter are starting to pay off. For example, users are retweeting more posts and marking more of them as a "favourite."

Costolo said the company will make it easier for people to start using the service and will also attempt to bring back inactive users.

"We think there's a lot we can do to significantly improve the user experience over the course of the year in 2014," he said.

San Francisco-based Twitter Inc. made its Wall Street debut in November with an initial public offering price of $26. The stock price has more than doubled since. Analysts remain confident about Twitter's business and long-term prospects, but many are calling its stock expensive compared with peers such as Facebook and LinkedIn.

Blau thinks it's too early to conclude whether Twitter's slowing user growth signals trouble ahead. That's because Twitter's usefulness isn't as readily apparent to many people as Facebook and LinkedIn. It takes just a few minutes to understand that Facebook is an easy way to create a digital scrapbook that can be shared with friends and family and that LinkedIn is a great place to post your professional achievements in hopes of getting better jobs.

But Twitter's potpourri can be confusing for beginners, Blau said, making it more challenging for the company to gain more users. "Twitter is all about connecting with real-time information," Blau said. "Once people get that, they tend to keep coming back and it opens up a whole new world of possibilities."

For the current quarter, Twitter is forecasting revenue of $230 million to $240 million. Analysts were expecting $215.2 million.

Twitter's shares fell $7.32, or 11 per cent, to $58.65 in extended trading after the results came out. The stock, which peaked at $74.73 on Dec. 26, closed Wednesday's regular trading session at $65.97.

Twitter is taking tweeted questions during its earnings conference call. Anyone who uses the short messaging service will be able to ask a question directed at @TwitterIR using the hashtag #TWTRearnings. Twitter's investor relations team will scan the questions, and the ones that make the cut will be interspersed in the call's question and answer period.

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AP Technology Writer Michael Liedtke contributed to this story from San Francisco.

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