Twitter said it expects monthly active users to decline in Q3, as well. The company's stock tumbled 20 percent. Trump accused the social media company of trying to silence prominent conservatives on the platform.
Twitter Inc on Friday reported fewer monthly active users than analysts expected and warned that the closely-watched figure could keep falling as it deletes phony accounts, sending shares sharply lower in early trading.
Revenue of $711 million, mostly from advertising and up 24 percent from a year ago, exceeded the average estimate of $696 million among analyst research aggregated by Thomson Reuters.
But that wasn't enough for investors. Twitter did suspend around 70 million accounts in May and June, but they did not affect the monthly active user account, since they were inactive for 30 days or more.
But a lingering concern has been the stalled user base, with Twitter struggling to move beyond its core group of celebrities, journalists and politicians. Twitter said in a blog post it had identified an issue where some accounts were not auto-suggested in search even when people were searching by specific name.
"We will continue to work hard to improve the health of the platform, providing updates on our progress at least quarterly, and prioritizing health efforts regardless of the near-term impact on metrics, as we believe the best driver of long-term growth of Twitter as a daily utility is a healthy conversation", Twitter said in its letter to shareholders. Financial analysts had estimated the revenue to come in at US$698 million.
"We are proud of the tangible improvements people are seeing on Twitter", the firm said.
Chief executive Jack Dorsey said the past quarter's results reflect investments "in the long-term health" of Twitter, noting efforts to weed out abusive and inappropriate behavior.
Shares are trading down nearly 5%, and at their lowest level since June 8, after both Facebook and Twitter reported disappointing user metrics this week. But the company gave a forecast for third-quarter earnings before interest, taxes, depreciation and amortization of as much as $235 million, falling short of analysts' average estimate of $268 million.
"It's becoming obvious that they have done something about the presence of fake accounts on their platform", said Jonathan Albright, a social media researcher for the Tow Centre for Digital Journalism at Columbia University.
But just like Facebook, Twitter said it's hitting a limit on how many people it can attract to its service, raising hairy questions about what these services can become. Daily active users however grew by 11%.
Twitter shares had more than doubled over the past year as it showed signs of sustaining profitability after years of losses.
In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there.