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Zynga Inc. on Wednesday reported first-quarter results that beat expectations, thanks to cost cuts and increased advertising revenue, but the videogame developer posted another sharp decline in customers.

The developer of games such as "FarmVille," "Mafia Wars" and "Words With Friends" narrowed its loss as total costs and expenses fell 10%, while advertising climbed 41% during the first quarter, as compared with the year-ago period.

Shares of Zynga, down about 7.6% over the past year, rose 12% to $2.57 in after-hours trading. The stock priced at $10 a share at its 2011 initial public offering.

"Over the long term, there's no reason why Zynga's margins can't be more in line with its peers," said Frank Gibeau, who was named CEO earlier this year. "We're committed to improving our operating leverage and cost management to attain those levels."

Average daily active users, however, sagged 21% to 19 million from a year ago.

For years, Zynga has been struggling to recapture on mobile devices the kind of success it had on desktop computers. On Wednesday, the company reported mobile bookings of $139 million during the quarter, representing 76% of overall bookings.

The gaming company, whose rise was propelled by a viral marketing relationship with Facebook Inc. in its early days, said Wednesday that Apple Inc. was now its largest platform partner, outpacing Facebook in terms of online game bookings.

For the current second quarter, Zynga projected a loss between $20 million and $26 million, or 2 cents to 3 cents a share, on revenue between $170 million and $180 million. Analysts, on average, were expecting revenue of $162 million and a fully reported loss of 3 cents a share, according to Thomson Reuters.

Zynga said it is on track to launch 10 games this year. Mr. Gibeau, who replaced founder Marc Pincus, said the company hasn't been aggressive enough about developing new titles.

"We need to sharpen our operating discipline and tempo," he said. "There are too many good ideas on whiteboards here that don't end up in code."

Part of the problem, Mr. Gibeau said, is that the company's talent "could be better resourced." In his first 60 days, he spent most of his time meeting with employees to learn about their work routines. One takeaway: "We need to be more focused on cross-team collaboration," he said.

For the quarter ended in March, Zynga posted a loss of $26.6 million, or three cents a share, compared with a loss of $46.5 million, or five cents a share, a year earlier. Excluding certain items, such as stock-based compensation, there were no per-share earnings in the latest quarter, an improvement from the loss of a penny per share in the year-earlier period.

Revenue rose 1.9% to $186.7 million.

Analysts surveyed by Thomson Reuters expected a loss of a penny per share on revenue of $162 million.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

May 04, 2016 16:35 ET (20:35 GMT)

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