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Twitter skids 17% on user growth, but earnings beat

Twitter reported quarterly results that exceeded Wall Street expectations Wednesday, but shares still slumped sharply as the company reported weak user growth.

The company's shares tumbled more than 10 percent in extended-hours trading. What is Twitter stock doing now? (Click here to get the latest quotes.)

The microblogging company posted earnings of 2 cents a share, excluding one-time items, on sales of $243 million, easily topping expectations for loss of 2 cents a share on revenue of $218 million, according to a consensus estimate from Thomson Reuters.

In addition, the company handed in current-quarter revenue of between $230 million and $240 million, versus expectations for $215 million.

(Read more: Facebook is becoming Twitter)

But the company said it averaged 241 million monthly users, up just 3.8 percent from the previous quarter—the lowest rate since Twitter began disclosing its user figures. Twitter's user numbers grew at 10 percent, 7 percent, and 6 percent during the first three quarters of the year, respectively.

And timeline views dropped sharply from 159 billion to 148 billion in the quarter, signaling that users were refreshing their Twitter accounts less often.

Other social media companies including Facebook and LinkedIn were also lower in after-hours trading.

"Twitter finished a great year with our strongest financial quarter to date," CEO Dick Costolo said in the company's press release. "We are the only platform that is public, real-time, conversational and widely distributed and I'm excited by the number of initiatives we have underway to further build upon the Twitter experience."

This is Twitter's first quarterly report as a public company. The company is scheduled to hold its earnings conference call at 5pm ET.

In a blogpost on Wednesday, the company said a recent study showed "hashtags drive significantly more earned media for brands. TV ads with hashtags had 42 percent more Tweets about the ads than those without hashtags."

The study additionally found that viewers watching TV with Twitter had an average ad recall of 53 percent, versus without 40 percent among viewers without a "second-screen," a key companion to TV ad purchases.

(Read more: Is this whatTwitter commerce will look like?)

Shortly before it went public in November, Twitter bought mobile ad start-up MoPub for $350 million in stock.

Analyst suspect the acquisition will eventually aid the microblogging site in using the data it has on its users to serve adverts to them on other sites.

The company has been under pressure to show that its service can become more mainstream.

Last month, reports surfaced that Twitter was close to finalizing a deal with Stripe, a payment services company which many believe will to help Twitter accept credit card payments from its users.

Twitter shares have gained more than 150 percent since its highly-anticipated initial public offering in November.

--By CNBC.com. Reuters contributed to this story.

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