By Devika Krishna Kumar and Yasmeen Abutaleb
(Reuters) - Twitter (NYSE:TWTR) Inc's shares fell more than 11 percent in extended trade on Tuesday after the microblogging company said its number of monthly average users grew at the slowest pace since it went public in 2013.
"This is unacceptable and we're not happy about it," Jack Dorsey, who stepped in as interim chief executive on July 1, said on a call with analysts.
Twitter said it had 304 million core users in the second quarter, up from 302 million in the prior quarter.
Twitter's struggles to increase its audience worries investors, who are focused on the company's growth potential, and the latest figures did little to reassure them.
The data on users overshadowed the company's second-quarter earnings and revenue, which exceeded expectations, and its bullish projections for future revenue.
Executives also made clear it would be a long process, and were candid about problems with the service.
"We do not expect to see sustained meaningful growth (in monthly active users) until we start to reach the mass market," Chief Financial Officer Anthony Noto said on the call.
"We have not clearly communicated Twitter's unique value. And as a result non-users continue to ask, 'Why should I use Twitter?' "Simply said, the product remains too difficult to use."
Twitter recognizes "there is an issue that needs to be worked on," Evercore ISI analyst Ken Sena said. "They were giving investors a sense of the challenge and I think the stock sell-off that you saw just reflected that."
After the bell, Twitter shares extended losses to more than 11 percent at around $32, after closing at $36.54 on the New York Stock Exchange.
Total revenue rose 61 percent to $502.4 million. Excluding the impact of a strong dollar, revenue rose 68 percent. Advertising revenue rose 63 percent to $452 million. Excluding the impact of the dollar, advertising revenue was up 71 percent.
The company's net loss narrowed to $136.7 million, or 21 cents per share, in the second quarter ended June 30 from $144.6 million, or 24 cents per share, a year earlier.
Excluding items, Twitter earned 7 cents per share.
Analysts on average had expected Twitter to earn 4 cents per share on revenue of $481.3 million, according to Thomson Reuters I/B/E/S.
Twitter estimated full-year revenue of $2.20 billion-$2.27 billion, up from its previous forecast of $2.17 billion-$2.27 billion.
Twitter is also in the midst of a management change after Chief Executive Dick Costolo abruptly announced in June that he was stepping down.
The company on Tuesday announced two other executive departures. Todd Jackson, a product manager, will move to Dropbox, and Christian Oestlien, vice president of product management, will join Google Inc (NASDAQ:GOOGL) unit YouTube.