Shares in Facebook plunged more than 20 percent in after-hours trading after the social network warned that it would be less profitable in the years ahead due to shifts in its ad business. His fortune tumbled in late trading Wednesday, as shares of the social media giant slid 20% in post-market trading in NY on disappointing results.
The revenue shortfall reflects warnings from Chief Executive Mark Zuckerberg that Facebook's bottom line could be affected by costly measures it is taking to improve safety and security for its 2.23 billion monthly active users. Sales grew 14 per cent to $13.2 billion in the second quarter compared with $9.3 billion a year ago.
Facebook said it had 1.47 billion daily active users in June, compared with the 1.48 billion average of analysts' estimates compiled by Bloomberg.
Wehner said revenue growth "decelerated" in the second quarter and will decline "by high single digit percentages" and added that "we are also giving people who use our services more choices around data privacy which may have an impact on our revenue growth".
Nearly all of Facebook's revenue - $13 billion of the total $13.2 billion - came from online advertising, a sector dominated by the California social network along with Silicon Valley rival Google.More news: Guardiola says repeat of record-breaking season 'impossible'
Facebook Chief Financial Officer David Wehner told investment analysts on a conference call that the company's operating margin, a key measure of profit, would trend toward the "mid-30s" over the next several years, down from 44 percent in the quarter that ended June 30.
It's a rare moment of weakness for Facebook (FB) at a time when investors are scrutinizing the company carefully to determine whether there is any lingering damage from months of bad press, user outrage and regulatory scrutiny. Many Facebook analysts hope that Instagram's growth will help offset any stagnation at the older social network. The social media company posted revenue of $13.23 billion in the period. That same number fell in Europe, where the company has had to comply with a strict new privacy law, known as GDPR.
For almost two years, Facebook has appeared bulletproof despite a series of scandals about the misuse of its giant social network. Facebook had 279 million daily users in the region in the second quarter, down from 282 million in the prior quarter, amid the rollout of sweeping new data protection regulations there. Facebook disrupted some business by putting in place new rules to get all political advertisers to verify their identities.
"The market was expecting a lot more", Wieser says. The company owns three other properties with more than 1 billion users: WhatsApp, Messenger and Instagram. He said the challenges included regaining public trust as well as increasing the number of people joining Facebook and the time they spent on the platform.
The problem: weaker-than-expected revenue growth, Facebook's first such miss since 2015. The company's user numbers also came below expectations, with the growth in monthly users stalled in the U.S. and down slightly in Europe.