Facebook (FB) Stock Sinks as Revenue Misses Expectations

Facebook CEO Mark Zuckerberg. Facebook on Wednesday reported second-quarter sales and user growth that fell short of analysts’ projections

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.

Through scandal and turmoil, Facebook had taken on an air of invincibility, with its user base continuing to grow and ad dollars fueling its steadily rising stock price. Sales grew 14 per cent to $13.2 billion in the second quarter compared with $9.3 billion a year ago.

There's a scratch in Facebook's Teflon coating as the social networking company loses approximately US$150 billion ($219b) in market capitalisation in under two hours, Reuters has reported.

The after-hours trading was on lower-than-expected revenue numbers from its second-quarter earnings report. Instagram last month reported it had hit 1 billion monthly users for the first time, up from 800 million in September.

Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded.

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.

The company also warned that it expects revenue growth to decelerate in the next couple of quarters as it promotes new, and for now less profitable, products- such as its Stories disappearing message feature.

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After the General Data Protection Regulation went into effect in Europe, Facebook started asking people to check their privacy settings and make sure they wanted to share certain kinds of data. User growth - both on a monthly and daily basis - was flat in the USA and the rest of North America, while it declined slightly in Europe.

"The market was expecting a lot more", Wieser says.

Last week, Facebook incited controversy once again during a Recode interview, in which Zuckerberg said that some Holocaust deniers who posted to the social network aren't "intentionally getting it wrong". So far, WhatsApp doesn't show ads, and its founders Jan Koum and Brian Acton left Facebook amid disagreements over advertising and other issues. "We think that's the right thing to do for the business", he said.

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.

Gene Munster, a venture capitalist at Loup Ventures, said in an email that Facebook is "entering a new period" where declining user growth will translate to slower revenue growth. Wednesday's closing price amounts to a 31 percent increase in the past year; earlier in the day, shares hit a record high. 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.

Analyst Ross Sandler with Barclays asked if revenue growth was set to drop to "around 20% by the fourth quarter of this year".

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