Twitter announces that CEO Dick Costolo will step down on July 1
Twitter CEO Dick Costolo is interviewed before the Twitter Inc. IPO on the floor of the New York Stock Exchange in New York on Nov. 7, 2013. Photo by Lucas Jackson for Reuters.

Twitter Inc said Dick Costolo is stepping down as chief executive and will be replaced by co-founder Jack Dorsey on an interim basis.

The company's shares rose 7.7 percent to $38.60 in after-market trading on Thursday.

Costolo, who will step down on July 1, will continue to serve on the board, the company said in a regulatory filing.

Costolo has agreed to cancel all of his remaining unvested equity in Twitter after July 1.

Dorsey, who will continue to serve as CEO of Square Inc, has served as Twitter's president and CEO from May 2007 to October 2008.

(Reporting by Anya George Tharakan in Bengaluru; Editing by Sriraj Kalluvila)