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Twitter Drops 12%: Why Isn’t ‘Top of the Funnel’ Growing? Street Asks

Shares of Twitter (TWTR) are down $2.29, or 12%, at $17.32, after the company this morning reported Q2 revenue and profit that topped analysts’ expectations, and forecast adjusted profit this quarter, but didn’t show the user growth the Street wanted to see — the “top of the funnel,” as they say on the Street.

Chief executive and co-founder Jack Dorsey touted the fact that the company’s "daily average users” rose by “double-digits” for the third quarter in a row, although Twitter doesn’t disclose the exact number of those daily users, people who have been logged in to the site on a given day.

On a conference call, however, analysts wanted to know how Twitter would deal with the top-of-funnel problem.

Its total average monthly users, or “MAUs,” at 328 million, rose by 5% from the prior-year period, and was flat with the prior quarter.

CFO Anthony Noto told user the assembled on the call that “obviously our focus has been on daily active usage,” because, as he put it, they are “the key driver of overall growth … from an advertising standpoint."

Revenue in the three months ended in June declined by 5%, year over year, to $574 million, yielding EPS of 8 cents.

Analysts had been modeling $537 million and 5 cents per share.

Twitter’s adjusted Ebitda came in at $178 million, up slightly from $175 million a year earlier.

For this quarter, the company projected Ebitda in a range of $130 million to $150 million, which which was a little bit below the average estimate, per FactSet, of $146 million.

Doug Anmuth of J.P. Morgan, who has a Neutral rating on the shares, called the...