Published: Thu, July 26, 2018
Money | By Michele Stevens

Facebook plunges as revenue, daily users disappoint

Facebook plunges as revenue, daily users disappoint

Growth in the number of users who logged in each day fell short, too, up 11 percent year-over-year at 1.47 billion but still less than the 1.49 billion anticipated.

Shares in Facebook, which have risen about 23 percent this year, fell 8.6 percent to $198.71 in trading after the bell as investors reacted to the results.

Facebook CEO Mark Zuckerberg could slide to sixth place from third on the Bloomberg Billionaires Index if the downward trend following late trading on Wednesday in the U.S. continues through Thursday.

But revenue - up 42 percent to $13.23 billion- was slightly below the $13.34 that Wall Street was expecting.

The company did beat on earnings, which rose 32% to $1.74 per share against an expected $1.72.

Total revenue rose 41.9 per cent to US$13.23 billion. In terms of revenue, the tech giant earned $13.23 billion but missed Thomson Reuters' estimates of $13.36 billion.

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"They're talking about currency headwinds, but more we think it's due to slower user growth given GDPR and more focus on privacy", Morningstar analyst Ali Mogharabi said.

Facebook attracted about 20% of digital advertising spending in the United States past year, according to research firm eMarketer.

Facebook also reported that its user base in Europe had shrunk because of a new privacy law there, marking one of the few times in the social network's history that it has reported a user decline in any region.

More disconcertingly for analysts and investors, though, company officials warned on the call that its annual growth rate would decline by the high single digits, percentage wise, in the second half of the year.

In late May, the General Data Protection Regulation came into effect in Europe, restricting the way advertising companies collect data from individuals. Stifel analyst Scott Devitt raised his price to $242 from $202, also on the premise of Facebook's strong digital advertising business.

Facebook's daily- and monthly- active user figures were all below analysts' predictions. The company may have halted more ad purchases than expected as it applied a broad definition of what's considered "political". The company owns three other properties with more than 1 billion users: WhatsApp, Messenger and Instagram.

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The firm, which is facing backlash for its handling of fake news and privacy, said it had 2.23 billion monthly active users at the end of June.

Of the newer endeavors, Instagram's business model is the most mature, and likely contributed meaningfully to revenue in the quarter, analysts have said.

Facebook has said it will increase spending to make investments in video content, and on new bets like artificial intelligence and virtual reality.

Despite the rocky quarter, Facebook shares had hit an all-time high before Wednesday's earnings report and its quarterly revenue was still up 42 percent from this time previous year.

He added that Facebook has "a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter".

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