Shares of Twitter Inc jumped on Wednesday after the microblogging service reported better-than-expected user growth in the first quarter, although its revenue fell for the first time.
The surprising acceleration, which Twitter attributed to new features and heightened user interest in political news, followed several quarters of stalled user growth that raised questions about Chief Executive Jack Dorsey's leadership and speculation the platform may be bought by a bigger company.
Twitter reported yearly growth of 6 percent in monthly active users, a key performance indicator for social networking services typically calculated by taking the number of users who have logged in and logged out during the 30-day period, to 328 million.
On a quarterly basis, Twitter added 9 million monthly users.
While Dorsey cited technical changes to Twitter's timeline which now lists content by themes instead of in a chronological order as part of the reason behind the user growth, Chief Operating Officer Anthony Noto said user interest in news and politics also played a role.
There is "some evidence that we benefited from our new and resurrected users following more news and political accounts in Q1, particularly in the U.S. That's a really positive thing," Noto said during a conference call with analysts.
U.S. President Donald Trump, one of the most active politicians on Twitter, has tweeted about five times a day on average since his inauguration in January, according to social media analytics company Zoomph.
Livestreaming, one of Twitter's biggest pushes since last year to attract new users, also jumped in the first quarter, with more than 800 hours of live video across more than 450 events.
Twitter said the content reached 45 million unique users, up 31 percent from the fourth quarter which was the first full quarter of live content to be streamed on the social media platform.
Of those hours, 51 percent were sports, 35 percent were news and politics, and 14 percent were entertainment, Twitter said.
"Twitter is becoming more relevant to consumers. They are making their products easier to use. And there is a global thirst for news and information that they are benefiting from," said BTIG Analysts Richard Greenfield.
But some analysts were cautious about the future path of user growth.
"I think that Trump drives a lot of awareness about Twitter among people who otherwise wouldn't be paying attention," said Michael Pachter, managing director at Wedbush Securities.
"But again, one quarter isn’t a trend, so let’s see if it’s sustainable."
Despite the user growth, Twitter's revenue for the first quarter fell 7.8 percent to $548.3 million, its first drop since its initial public offering.
Twitter's advertising revenue plunged 11 percent to $474 million in the quarter, but came in above the average analyst estimate of $442.7 million, according to market research firm FactSet StreetAccount. Just in the United States, the decline was steeper at 17 percent.
Net loss narrowed to $61.6 million, or 9 cents per share, in the quarter ended March 31, from $79.7 million, or 12 cents per share, a year earlier. (bit.ly/2phNNZH)
Excluding items, the company earned 11 cents per share, beating the estimate of 1 cent per share.
"While we face revenue headwinds, we made progress focusing revenue products on our strengths," Dorsey said, adding that user growth will contribute to revenue and profit going forward.
The shares were up 9.9 percent at $16.10 by midday.
(Reporting by Angela Moon in New York and Rishika Sadam in Bengaluru; Editing by Saumyadeb Chakrabarty and Meredith Mazzilli)