Facebook Stock Down 9% Following Q2 Revenue Miss, Slowing User Growth

Facebook Stock Down 9% Following Q2 Revenue Miss, Slowing User Growth”

In announcing its latest earnings on Wedneday, the social media company reported 2.23 billion monthly active users, shy of Wall Street forecasts of 2.25 billion.

Still, the loss of users should not have shocked investors because Facebook has said for the past two quarters that it was starting to hit the zenith of user growth in its most mature markets like North America.

"Our community and business continue to grow quickly", Facebook CEO Mark Zuckerberg said in a statement.

Ad sales in the second quarter rose 42 per cent to US$13.04 billion but costs, bolstered by moves to improve content and security after the data scandal, rose 50 percent from a year earlier to US$7.37 billion.

The company reported $US5.1 billion in profit, or $US1.74 per share, compared with the average estimates of $US5.1 billion and $US1.72 per share among research gathered by Thomson Reuters.

Total revenue rose 41.9 per cent to US$13.23 billion.

Now Facebook's market value sits at $483 billion, with shares falling about 24% in after hours trading.

Indeed, Wehner said Facebook's revenue growth rate, year over year, will drop by "high single digits" in this quarter and in Q4.

Separately Wednesday, Facebook general counsel Colin Stretch, who advised the company through a series of probes and investigations into data privacy, said he would be leaving for personal reasons.

Throughout the earnings call, efforts were made to highlight the fact that the company's future growth would not come from the core Facebook platform but from its other properties, including its messaging apps and Instagram.

"Over the next several years, we would anticipate that our operating margins will trend toward the mid-30s on a percentage basis", Wehner said.

Active user growth was also a huge miss. Instagram last month reported it had hit 1 billion monthly users for the first time, up from 800 million in September.

"So far, there has been no evidence that shows that controversies, such as the spread of fake news, Russian interference in the USA elections, and the Cambridge Analytica scandal, have prompted advertisers to divert ad dollars", says Haris Anwar, senior analyst at

About 2.5 billion people use at least one of the company's apps each month, Facebook said.

Almost all social media services have received greater scrutiny since USA intelligence agencies in January 2017 revealed that organisations tied to the Russian government had seeded content on the platform to shake up the 2016 U.S. presidential election.

For advertisers, though, Facebook and Instagram are performing as well as ever. "We did see a decline in monthly actives in Europe, down by about 1 million people as a result", Zuckerberg said on conference call.

The company remains in a dominant position in mobile advertising alongside Alphabet Inc.'s Google.

"Overall, this is a critical year for Facebook".

"It wouldn't be surprising if a couple million very irritated Brits left Facebook", says Brian Wieser, analyst with Pivotal Research.

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