- Facebook announced its Q2 2018 financial results on Wednesday – and in a rare miss, it failed to hit Wall Street’s expectations.
- During the conference call, Facebook executives warned that revenue growth rates will decline by “high single digit” percentages in the coming quarters.
- Facebook’s stock plunged more than 20% after the comments, wiping nearly $US150 billion in market value.
- Facebook’s daily- and monthly- active user figures were all below analysts’ predictions.
- The disappointing numbers highlight the bind the company is in while it attempts to please both growth-hungry investors and a disillusioned userbase following a chain of scandals.
Facebook lost more than one hundred billion dollars in market value in a matter of hours on Wednesday after the internet company told investors to expect revenue growth rates to decline for the remainder of the year.
Shares of Facebook plunged more than 20% in after hours trading, as executives recapped second quarter results that fell short of Wall Street expectations and delivered a financial forecast that seemed to catch investors by surprise.
The savage investor reaction underscores the enormous challenge facing CEO and founder Mark Zuckerberg, who is scrambling to defuse widespread criticism of the 2-billion member social network’s negative effects on society in the wake of scandals involving user data and the spread of misinformation and propaganda on the site.
While Zuckerberg has vowed to address the problems through major changes to its business practices and investments in new resources, analysts that cover the stock have maintained a positive outlook, insisting that it would essentially be business as usual for Facebook’s lucrative advertising operations.
That notion came to an end on Wednesday.
“We expect revenue growth rates to continue to decelerate in the second half,” Facebook CFO Dave Wehner said during the quarterly conference call with investors.
Competing pressures on Zuckerberg
Facebook’s revenue in the second quarter 42% year-over-year, but fell short of Wall Street targets. The company’s user numbers also came below expectations, with the growth in monthly users stalled in the US and down slightly in Europe.
The lone bright spot in Facebook’s Q2 results came in the form of earnings per share, which edged above the street’s expectations.
Here are the key numbers versus what Wall Street was expecting for the quarter (expectations via Bloomberg):
- Revenue of $US13.23 billion, up 42% year-on-year ($US13.3 billion predicted)
- 2.23 billion monthly active users, up 11% year-on-year (2.25 billion predicted)
- 1.47 billion daily active users, up 11% year-on-year (1.48 million predicted)
- Earnings per share (EPS) of $US1.74 ($US1.72 predicted)
Facebook is trying to make amends after weathering intense public, political, and regulatory blowback over a chain of trust-eroding scandals – but its investors are hungry for growth, and easily spooked.
Zuckerberg warned in late 2017 that the company was investing so heavily in security and safety it could harm the business short-term, and the negative market reaction illustrates the competing pressures the 34-year-old CEO has been forced to contend with.
Facebook’s headcount increased 47% year-on-year, to 30,275 as of June 30, 2018.
Facebook has had a bruising few months, from ongoing fallout from the spread of Russian propaganda to the aftermath of the Cambridge Analytica scandal, and fierce controversy over whether fake news and disinformation should be allowed on the site.
But this hadn’t previously put off investors. Its stock reached all-time-highs of more than $US216 on Wednesday ahead of its earnings announced. Analysts had predicted a booming quarter for the company, based off the runaway success of Instagram and continued strength in its core advertising business.
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