Shares of Facebook Plunge As Revenue Misses and Slowdown Projected

Facebook fell short of projections for its global revenue and daily active users during the most recent quarter, after it struggled with scandals over fake news and data leaks.

The social media giant posted earnings for the second quarter after the closing bell Wednesday. Shares fell by 20% or more in afterhours trading. At one point, over $123 billion had been wiped off the market value of Facebook.

Facebook posted revenue of $13.23 billion while analysts were expecting slightly more at $13.36 billion. Earnings per share reached $1.74 which beat projections by analysts of $1.72 per share.

Facebook’s global daily users reached 1.47 billion but analysts were expecting 1.49 billion. European daily users reached 279 million, while analysts were expecting 279.4 million. The average revenue per each user ended the quarter at $5.97 while analysts were expecting $5.95.

Facebook announced that 2.5 billion people were using one of its host of apps each month that included WhatsApp and Instagram. Though the global daily users rates that are Facebook-specific increased by 11% year over year, with growth being led by users in the Philippines, Indonesia and India, it was not as high as what Wall Street had projected.

European daily users were down from last quarter’s 282 million which could be related to the General Data Protection Regulation or GDPR imposed by the European Union. The new set of regulations allows users more control their personal data online.

Daily users in North America were flat despite fallout from the scandal involving Cambridge Analytica that involved a data leak and issues with fake news. However, in the region, the per user average revenue rose nonetheless, reaching $25.91 up from a per user rate of $23.59 during the 2018 first quarter.

Facebook surprisingly came up short in advertising revenue projections as they were $13.04 billion while analysts were expecting $13.16 billion.

During a call with Wall Street analysts, Facebook said that it expected its growth rates for revenue to be lower than the year before, especially during the second six months of 2018.

It also expects the drop in the third and fourth quarters of this year to be as high as the high single digit percentage.

Reason for that included the investment by Facebook in Stories, which has monetization that is lower and the improvement of privacy features due to the GDPR and other demands by users.

Leave a Reply