Twitter added 13M monthly active users in Q3, but growth slowed & engagement declined

Today Twitter reported better-than-expected fiscal third quarter earnings for 2014, with revenue of $361 million on non-GAAP earnings per share (EPS) of $0.01. Analysts had expected EPS of $0.01 and revenue of $351.35 million.

In the third quarter, Twitter added 13 million additional monthly active users — the company now has 284 million monthly active users in total.

Slowing growth

Yes, Twitter is growing! But from Q2 to Q3, Twitter’s monthly active user base grew by just 4.8 percent. By comparison, from Q1 to Q2, Twitter’s monthly active user base grew by 6.2 percent. This means that quarter-over-quarter growth has slowed. Growth rate fluctuation isn’t unusual for Twitter, but investors aren’t happy: In regular trading, Twitter was down by over 3 percent. In after-hours trading, at the time of writing, Twitter was down by approximately 10 percent.

Twitter said it had 271 million monthly active users last quarter. Analysts loosely expected Twitter to add around 12.5 million monthly active users this quarter.

Declining engagement rate

This quarter, Twitter said active timeline views per monthly active user dropped 4 percent in the U.S. year-over-year — 9 percent for international monthly active users.

For context, Twitter invested in a number of new initiatives in the third quarter, only some of which will drive revenue in the near-term. The company launched its Fabric developer tools, built a buy button for tweets, partnered with a French bank, and dropped $10 million into a MIT Media Lab program.