Twitter's users and usage grow, investors cheer

Twitter's growth problems may be subsiding.

The social networking giant said more people were on Twitter and using it more, answering at least for now lingering questions about its ability to grow. Its increasing user base alongside a surprising profit -- excluding one-time items -- for its second fiscal quarter impressed investors enough to send shares soaring in after-hours trading on Tuesday.

Dick Costolo, Twitter's chief executive, told analysts on a conference call that the company's consumer product is starting to look the way he wants it to. In particular, he said, Twitter's work during the World Cup soccer matches -- making it easy for users to view and participate in conversations about team matches in people's mobile devices -- "delivered the kind of events experience that I have wanted to see from us for some time," he said. "That has given me confidence that we can create great user experiences by organizing content around topics and live events."

Twitter has long struggled to show it too can be a large and profitable business behind Facebook, which saw its profit more than double as users and advertisers flocked to its service for mobile devices. Twitter, by contrast, has attempted to show investors it can create an advertising platform that doesn't rely on displaying a typical image or video, the way Facebook does.

Instead, Twitter has built its service on what it calls "promoted" items, or advertising-supported Tweets and trends within its service. Tech titan Samsung, for example, can pay to display a Tweet about its Galaxy S5 smartphone to what it thinks are likely buyers, rather than hoping they find the company's missives on their own.

Twitter used this model, in addition to other nascent revenue efforts, to build its business ahead of its IPO. But it has also struggled to prove to investors that its growth rate can match its larger cousin.

One way the company is attempting to do this is by referencing the users who look at content from Twitter, whether on TV or embedded into a website, but aren't signed up or logged in to the service. Costolo said his team estimates that audience is two-to-three times the size of its reported active users, and the company plans to begin creating specialized "products" for them, such as ads or curated content.

Its results Tuesday indicate its growth engine is still revving. Twitter said it tallied 271 million users who logged into the site at least once a month for its second fiscal quarter, ended June 30. That amounted to an anemic rise of about 6 percent from 255 million in March, but was still enough to impress Wall Street.

Timeline views, an important metric for advertisers to gauge how often someone views a page on the site, were 173 billion, up from 157 billion in March. Analysts and investors are watching that metric carefully because it's considered an indication of the data advertisers watch to indicate how active Twitter's users are.

Investors were impressed, pushing the company's shares up more than 26 percent in after-hours trading, after closing up nearly 2 percent to $38.59.

The company also beat expectations on the fundamentals, posting revenue and a profit ahead of Wall Street expectations. The company said revenue more than doubled to $312 million, up from $139 million a year earlier. Importantly, that was also well above expectations of $283 million, according to surveys by Thomson Reuters.

Twitter's profit, excluding items such as stock-based compensation, was two cents per share, much higher than analyst expectations of a loss of 1 cent per share.

Another indication of Twitter's strength was its own forecasts for the full year. The company said it now expects to ring up revenue between $1.31 billion and $1.33 billion, up about 10 percent from its earlier estimate.