SAN FRANCISCO (REUTERS) - Twitter's monthly active users rose a better-than-expected 24 per cent in the second quarter as the online messaging service mostly succeeded in stemming a dwindling pace of growth, sending its shares soaring after hours.
Twitter, which has battled to reverse a steady decline in its once-heady pace of user growth, saw users increase to 271 million, still dwarfed by rival Facebook's 1.3 billion.
Wall Street analysts had been expecting a pace of growth closer to 21 per cent.
Timeline views, a measure of the engagement of its users, also exceeded expectations with a 15 per cent increase, far outpacing the roughly 8 per cent expected.
Twitter, whose rapid-fire format has proven popular as a companion to major global events, may have enjoyed a boost from the World Cup. The world's most popular sporting event peaked with the finals in July.
For the current quarter, Twitter is forecasting revenue of US$330 million (S$410 million) to US$340 million, again outpacing forecasts for around $323.7 million, according to analysts polled by Thomson Reuters I/B/E/S.
"The expectations going in had become quite low," said Sterne Agee analyst Arvind Bhatia. "Even in the US their performance was good. For now, that will put to rest some of the concerns about US growth."
"One would still have to say that the jury is still out," Bhatia added. "You have to look maybe at what happens in the next quarter and see if they can continue to have upside on the user growth."
Its shares jumped 35 per cent to US$51.20 in extended trading, from a close of US$38.59 on the New York Stock Exchange.
Before Tuesday's after-hours surge, Twitter had lost about 40 per cent of its market value since the start of 2014.
Yet it remains valued at almost 200 times earnings, based on bullish investors' belief it can transform itself into a mainstream Internet platform on the same scale as Facebook.
Some investors argue its reported user numbers do not fully reflect engagement, particularly with media viewers. Others say its inherently complex format deters wider adoption.
At its peak, Twitter enjoyed a US$46 billion capitalisation on US$665 million of revenue in 2013, making it at the time one of the world's priciest stocks.
User growth has stagnated since Twitter went public to much fanfare in November. Chief executive Dick Costolo has said that tweaks to Twitter's product would result in better user engagement, and has asked Wall Street for time to show improvement.
It has granted more prominent placement to photographs to liven up its interface, simplified the sign-up process, and allowed ads touting mobile-app installations to drive up revenue.
On Tuesday, Twitter reported a 124 per cent jump in quarterly revenue to US$312 million, beating expectations for US$283.1 million. It posted non-GAAP net income of US$14.6 million or 2 cents a share, reversing a loss of US$16.4 million or 12 cents a share a year earlier.