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Twitter earnings: 13 cents per share, vs expected EPS of 10 cents

Twitter on Tuesday posted mixed quarterly results and disappointing sales guidance, even though its user base grew more than expected.

The social media company said it expects third-quarter revenue of $590 million to $610 million, well below analyst expectations for $678 million, according to a Thomson Reuters consensus estimate.

Twitter said in a statement that both its second-quarter performance and third-quarter outlook reflect "a continuation of the trends discussed last quarter with less overall advertiser demand than expected." It also said its "brand business remains strong in absolute terms, but there are some new challenges that we're now tackling head-on."

The company posted second-quarter adjusted earnings of 13 cents a share on revenue of $602 million. Wall Street expected it to post earnings of 10 cents a share on revenue of $607 million, according to a Thomson Reuters consensus estimate. Profit per share was up from 7 cents a year earlier, and revenue rose 20 percent.

Average monthly active users came in at 313 million, slightly higher than analyst estimates for about 312.1 million MAUs, according to StreetAccount.

The company's shares dropped more than 10 percent in after-hours trading Tuesday.

Twitter remains confident that there will " be a long-term shift away from desktop video to premium mobile environments" and that the company is "well-positioned to benefit from that shift." It said, however, that "it will take time for marketers to understand the impact of video ads on mobile vs. the alternative."

The social media company said that in order for it to "unlock" advertising budgets, it will need to "launch additional features and functionality over the next few quarters including accurate audience verification, reserved buying, and reach and frequency planning and purchasing."

While there is a shift in the advertising industry, Michael Graham, managing director and senior equity analyst at Canaccord Genuity, said Twitter is not seeing increased spending from advertisers.

"They're seeing a shift towards video ads and that's good, but they're not seeing increased budgets. So advertisers love to see engagement and I think that we're likely not seeing the engagement with the ads that the advertisers want to see," Graham said in an interview Tuesday on CNBC's "Closing Bell."

As part of its bet on live stream, Twitter has signed a deal with the National Basketball Association to stream exclusive content including a weekly pregame show and Thursday night games.Twitter also signed a deal with CBS News to stream its coverage of the Republican and Democratic national conventions.

Still, analysts and investors are skeptical about whether CEO Jack Dorsey can run both Twitter and Square. With the shares trading below $20, experts have suggested that Twitter is becoming a potential takeover target.

— CNBC's Michelle Fox contributed to this report.

Disclosure: Canacord Genuity or one or more of its affiliated companies is a market maker or liquidity provider in Twitter. The firm or one or more of its affiliates intend to seek or expect to receive compensation for investment banking services from Twitter.