Twitter shares took a pounding Friday as a warning of a shrinking user base overshadowed news of a third straight quarterly profit.
Twitter said it posted a profit of $100 million in the second quarter, following a loss of $116 million a year earlier, as revenue rose 24 percent to $711 million.
But the San Francisco-based firm said its base of monthly active users fell by one million from the past quarter to 335 million in the period amid a purge of fake and abusive accounts and a crackdown on “bots” that manipulate the platform.
Twitter said it also expected user declines in the current quarter which would likely be in the “mid-single-digit millions.”
The drop in users comes from “prioritizing the health of the platform, and, to a lesser extent, GDPR,” Twitter said, referring to Europe’s General Data Protection Regulations that limit how internet firms can handle user data.
Shares in Twitter slumped as much as 20 percent in pre-opening trades in a market jittery following a weak outlook from social network leader Facebook, later paring the loss to around 12 percent.
Chief executive Jack Dorsey said the results reflect investments “in the long-term health” of Twitter, noting efforts to weed out abusive and inappropriate behavior.
“We’ll continue to invest heavily in making Twitter a healthier place because that’s the right thing to do,” Dorsey told analysts on a conference call.
Dorsey noted that Twitter is investing in “new tools to address problem behaviors that distort and distract from the public conversation.”
Twitter in recent weeks has stepped up efforts to weed out accounts that promote violence or hate speech, and some reports suggested this could lower the user base by millions.
The company has said most of the blocked accounts were revoked within the first 30 days, and thus not part of the user base count.
Twitter shares have more than doubled over the past year as it shows signs of sustaining profitability after years of losses.
But a lingering concern has been the stalled user base, with Twitter struggling to move beyond its core of celebrities, journalists and politicians.
Both Twitter and Facebook moved to crack down on bots and fake accounts after learning of efforts to manipulate the social platforms during the 2016 US presidential election.
Dorsey told analysts Twitter had a “solid quarter” and suggested that daily usage was a better measure of its future growth.
Twitter said daily active users rose 11 percent from a year ago, without giving a specific figure.