Markets

Facebook stock falls 24 percent on forecast for slowing growth, rising expenses

Facebook stock falls 24 percent on forecast for slowing growth, rising expenses

A data-analytics dustup that dominated much of the year and lingering questions about how it handles misinformation dinged the social-networking juggernaut on Wednesday, sending its shares into a tailspin in late trading. The social media giant's shares are plunging at breakneck speed of nearly 20% in after-hours trading.

Zuckerberg called it an "amazing acquisition", saying Instagram grew twice as fast as it would have by being part of Facebook, without explaining his methodology.

Sales in the second quarter grew 42 percent, its slowest pace in almost three years, to $13.2 billion compared with $9.3 billion a year ago.

The after-hours trading was on lower-than-expected revenue numbers from its second-quarter earnings report.

Revenue fell a little short of estimates - $13.23 billion, compared to the Thomson Reuters estimate of $13.36 billion.

Other factors have also hurt Facebook's number of users, Zuckerberg said, including tough European rules that went into effect in May to protect people's online data.

Instagram is expected to account for 18 per cent of Facebook's revenue this year and 23 per cent next year, according to research firm EMarketer.

It's the first time Facebook missed an earnings report since 2015.

The proximate cause was the company's disclosure its revenue rate growth will slow precipitously in the current quarter and the next one. Facebook said mobile made up 91 per cent of ad revenue in the recent period, compared with about 87 per cent a year earlier. The period was also marked by Europe's implementation of strict new data laws, which Facebook said led to fewer daily visitors in that region. We launched our tool to make political advertising much more transparent, including letting you see who any political or issue ad is targeting, how much they're spending and more. In North America, an effort to get all political advertisers to verify their identities may have halted some purchases as the company worked through its broad definition of what's considered "political".

In the United Kingdom, especially, Facebook drew the ire of lawmakers, who hit the social network with a $650,000 fine, the maximum amount allowable for mishandling user data. Instagram now has more than 1 billion users, and analysts expect it to be a model for how Facebook molds its other big app purchase, WhatsApp, into a lucrative business. "We think that's the right thing to do for the business", he said. Together, the entire Facebook suite of products has 2.5 billion unique monthly users, the company disclosed for the first time.

During the conference call, Facebook executives warned that revenue growth rates will decline by "high single digit" percentages in the coming quarters.

It said it now employed 30,275 people, up 47% from a year ago. But Facebook, which reported sales growth averaging 50 percent the past 10 quarters, may just be lowering the bar so it can win back confidence in future quarters. Furthermore, user growth, both DAUs and MAUS came below expectations at 1.47B and 2.23B, vs. consensus of 1.49B and 2.25B, respectively.


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