Internet company AOL Inc. said Tuesday that its net loss narrowed in the second quarter even though revenue fell, largely because the results a year ago were weighed down by a huge accounting charge.
AOL's advertising revenue grew for the first time since 2008 in what CEO Tim Armstrong called "another meaningful step forward in the comeback of the AOL brand."
But investors sent AOL's stock tumbling 20 percent as they focused on a slowdown in June and lowered expectations for an adjusted income figure.
The company has been working on turning its business around as demand for its old dial-up Internet access service fades. It's been trying to boost advertising opportunities by expanding content offerings to lure visitors.
AOL bought The Huffington Post this year for $315 million and the technology blog TechCrunch last year, adding them to a stable that currently includes more than 50 websites.
"We have cleaned up and simplified our operations," Armstrong told analysts in a conference call. "We're witnessing encouraging metrics in key growth areas, and we're seeing the beginning of this manifest in our reported numbers."
Investors weren't as impressed. The company's stock dropped $2.97 to $12.10 in midday trading Tuesday. Earlier, it traded as low as $11.80, marking the stock's cheapest price since it began trading publicly after separating from media conglomerate Time Warner Inc. in late 2009.
Investors may have been focusing on AOL's revenue from display advertising and search, both of which weakened in June. Much of the growth in ad revenue came from its less-profitable third-party ad business. Chief Financial Officer Artie Minson said AOL's search advertising trends "got a little bit weaker as we moved through the quarter."
The company lowered its outlook for a figure called adjusted operating income before depreciation and amortization, or OIBDA. This measures restructuring costs, stock-based compensation and gains and losses on asset disposals, among other items. It expects adjusted OIBDA in the range of $340 million to $370 million for the full year.
Evercore Partners analyst Ken Sena said investors seem concerned about this figure because it suggests, among other things, that some acquisitions the company made this year aren't contributing as much to AOL's profitability as the company would like.
And given that the company reorganized its advertising sales force in July, he said this "just gives the impression that the company is still very much in turnaround phase instead of inflecting and showing some positive signs."
For the second quarter, AOL posted a net loss of $11.8 million, or 11 cents per share. A year ago it lost $1.06 billion, or $9.89 per share. That was largely because of writedowns of $1.41 billion for the declining value of its assets and the sale of social networking site Bebo.
In the latest quarter, AOL booked special items totaling 15 cents per share. Excluding these, the company would have earned 4 cents per share.
Revenue fell 8 percent to $542 million from $592 million. Analysts had expected lower revenue of $535 million, according to a poll by FactSet.
Advertising revenue grew 5 percent to $319 million, helped by AOL's acquisition of Huffington Post.
Subscription revenue fell 23 percent to $201 million as fewer people paid to access AOL's waning dial-up service.
Rachel Metz reported from San Francisco.