Twitter Inc.'s long-awaited turnaround is still a work in progress.

The social media company on Tuesday showed few signs that it has resuscitated growth, while revenue increased at a slower rate compared with a year earlier. Shares dropped 11% to $15.84 after hours.

Twitter's revenue increased 36% to $594.5 million for the period ended March 31, compared with $435.9 million the previous year, when it jumped 74%. Analysts surveyed by Thomson Reuters on average had estimated Twitter would post revenue of $607.8 million.

The company also posted a downbeat forecast for second-quarter revenue, saying it sees its top line ranging from $590 million to $610 million—significantly lower than the $678 million analysts had expected, according to Thomson Reuters.

At the same time, Twitter scraped together 5 million net new users in the first quarter, bringing its global logged-in audience to 310 million, up 1.6% from the prior quarter. While the company managed to stop last quarter's declining user numbers from becoming a troubling trend, the meager bump in growth is far from comforting. If anything, it underlines the steep challenge facing CEO Jack Dorsey, the co-founder who returned on a permanent basis in October to right the ship.

Since his return, Mr. Dorsey's has dealt with a sudden exodus of veteran senior executives, a move that can be construed as a blessing in disguise because it allowed the new CEO to fill the ranks with his own trusted lieutenants. He has started making changes to the board, replacing two longtime members—Silicon Valley heavyweight Peter Currie and Hollywood executive Peter Chernin—with Hugh Johnston, the CFO at PepsiCo Inc. and Martha Lane Fox, a serial entrepreneur in Britain.

Earlier this month, Twitter emerged as the surprise winner in a bid to stream 10 National Football League games, a deal that Morgan Stanley estimated could attract roughly 1.1 million viewers a game but unlikely to drive significant user growth because it requires users to radically change their viewing behavior.

Last quarter, Mr. Dorsey and his management team laid out the company's priorities for the current year. At the top of the list was to fix the "broken windows" that cost them new users trying to learn how to use Twitter.

Twitter continues to tweak its product to make it easier to use—though few, if any, of those changes in the latest quarter were aimed at getting rid of the "confusing parts," as Mr. Dorsey put it last quarter. One change came in February when Twitter gave users the option to see more of the "best" tweets they missed while they were gone at the top of the timeline when they signed back in, a feature that was intended to help existing users see the most interesting tweets faster.

According to eMarketer, Twitter will earn $2.61 billion in total digital ad revenue world-wide this year. The research firm said it adjusted its estimate down from the $2.95 billion it had predicted in the third quarter of 2015 because of the stalled user growth.

Twitter is forecast to grab a 7.9% share of world-wide social network ad spending this year, according to eMarketer. In comparison, Facebook Inc., which has nearly 1.6 billion monthly active users, is forecast to claim 67.9%.

Twitter remains unprofitable. It posted a loss of $79.7 million, or 12 cents a share, compared with a year-ago loss of $162.4 million, or 25 cents a share. Excluding certain expenses, Twitter said it would have earned 15 cents a share, up from 7 cents a year earlier. Analysts had expected earnings of 10 cents a share on that basis.

Write to Yoree Koh at yoree.koh@wsj.com

 

(END) Dow Jones Newswires

April 26, 2016 17:05 ET (21:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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