What happened

Shares of Cheetah Mobile (NYSE:CMCM) slumped on Tuesday after the mobile app company announced its second-quarter results. The company missed analyst estimates for both revenue and earnings, sending the stock down about 17% by 12:30 p.m. EDT.

So what

Cheetah Mobile reported second-quarter revenue of $177.2 million, up 14.8% year over year and about $2.4 million below the average analyst estimate. Utility products and related services generated $121 million of revenue, down 13.3% year over year. Mobile entertainment revenue soared 270.5% year over year to $54.7 million, driven by broadcasting revenue from Live.me and the mobile game portfolio.

The Cheetah Mobile logo.

Image source: Cheetah Mobile.http://www.cmcm.com/images/share/cheetah-mobile-share.jpg

Diluted net income per ADS came in at $0.07, missing analyst expectations by $0.01. Cheetah Mobile CFO Vincent Jiang discussed how the company is working to maximize profits from the utility business:

We made a concerted effort in controlling our utility products' cost and expenses in the second quarter of 2017. As a result, our operating profit and net cash generated from operating activities for the quarter grew significantly both year over year and quarter over quarter. For the second half of 2017, we have a clear strategy to maintain our utility products' profitability and at the same time grow our Live.me and mobile game businesses.

Now what

For the third quarter, Cheetah Mobile expects to produce revenue between $170 million and $178 million, up 2% to 7% year over year. The utility business will continue to be a drag as the company invests in growing its mobile entertainment business.

While Cheetah Mobile didn't miss analyst expectations by much, an outlook calling for sluggish revenue growth during the third quarter added to the bad news and sent the stock lower.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.