- The FTC has launched an anitrust investigation into Facebook.
- The tech firm revealed the news alongside its Q2 2019 financial results on Wedneday.
- Facebook beat Wall Street’s expectations for revenue, and it would have on EPS if it wasn’t for a $US5 billion settlement it paid to the FTC over another probe into privacy issues.
- The company’s stock climbed a little higher in after-hours trading on the news.
Facebook is facing an antitrust investigation by US federal regulators, the company disclosed on Wednesday, overshadowing the better-than-expected second quarter financial results it reported and signalling that the regulatory risks facing the social networking giant are far from over.
In a dizzying sequence of events, Facebook reported Q2 revenue that topped Wall Street’s expectations Wednesday, just hours after discussing the $US5 billion fine it will pay the US Federal Trade Commission to settle myriad allegations concerning its privacy practices.
The strong Q2 financial results initially sent Facebook’s stock jumping as much as 5% higher in after-hours trading. But as investors took note of another line in Facebook’s Q2 press release, revealing a separate FTC investigation into the company’s business practices, the stock gave back its gains. Warnings on the earnings call with analysts that the company faces further revenue decceleration in the second half of 2019 briefly pushed Facebook’s stock into the red, and as of writing it is a little more than 1% up.
Facebook said the latest FTC probe was begun in June, but did not provide any details on the antitrust investigation. The FTC has confirmed that it exists, but did not comment further.
After two years of constant scandals, Facebook’s stock has largely rebounded in recent months, and is up more than 50% so far this year. Prior to its Q2 results, analysts had been broadly bullish about the company’s prospects in light of its steady user numbers – illustrating how its crises have thus far failed to put in a serious dent in the business.
Here are the key numbers from Facebook’s Q2 earnings report:
- Revenue: $US16.89 billion, up 28% year-on-year (versus $US16.49 billion expected)
- Earnings Per Share (EPS) GAAP: $US0.91 (versus $US1.74 expected, does not compare)
- Daily Active Users: 1.59 billion, up 8% year-on-year (versus 1.57 billion expected)
- Monthly Active Users: 2.41 billion, up 8% year-on-year (versus 2.42 billion expected)
Facebook generated revenues of $US16.89 billion for the quarter, up 28% compared to the same time period a year prior. While the revenue topped Wall Street expectations, it nonetheless represents a significant slowdown from the growth Facebook enjoyed just a year ago. In the second quarter of 2018, for example, Facebook’s revenue grew 42% year-over-yar.
The company’s daily and monthly active user numbers were roughly in line with Wall Street’s expectations, and were up 8% year-on-year.
Facebook’s profit margins also took a hit, because of the legal expenses and fines associated with the FTC privacy investigation. The company’s 27% operating margin in Q2 compares to a 44% margin during the same period a year earlier. Facebook said its profit margins would have been 12 perecentage points higher had it not been for various legal and tax expenses.
This earnings results come just hours after the FTC announced it had reached a record-breaking $US5 billion settlement with Facebook over the company’s myriad privacy issues and alleged violations of a 2012 consent decree. That settlement meant that Facebook’s earnings per share were significantly lower than anticipated – $US0.91, versus $US1.74 consensus estimates – but the company said that if it had not been fined, that figure would have been $US1.99, handily beating predictions.
Business Insider is covering Facebook’s Q2 2019 results live. Refresh this page or click here for the latest updates…
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