Published: Thu, July 26, 2018
Markets | By Josh Butler

Facebook Shares Plummet After Missing User, Revenue Targets

Facebook Shares Plummet After Missing User, Revenue Targets

It reported 2.23 billion monthly active users and 1.47 billion daily active users, which were both up 11 percent year-over-year but narrowly missed estimates.

Facebook founder and CEO Mark Zuckerberg's net worth dropped by a staggering $16.8 billion in late trading hours.

Its $1.74 earnings per share beat expectations of $1.72.

Total revenue rose 41.9 per cent to US$13.23 billion.

In February, the research firm eMarketer estimated that the number of Facebook users under the age of 25 would fall by about 2 million this year.

He added that Facebook has "a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter".

Facebook lost users in Europe in the second quarter, when it implemented changes to follow new privacy rules in the European Union and faced more intense scrutiny in the fallout from the Cambridge Analytica affair.

According to marketing agency Merkle, ad impressions on Instagram have also grown significantly, more than tripling year-over-year during the second quarter, with ad spending up 177% year-over-year among the agency's North America clients. News that the data firm accessed information from as many as 87 million Facebook (FB) users without their permission broke in the final weeks of the first quarter.

Facebook's daily- and monthly- active user figures were all below analysts' predictions.

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"Over the next several years, we would anticipate that our operating margins will trend toward the mid-30s on a percentage basis", Wehner said.

Shares in Facebook fell about 8% in after hours trade in NY. If those losses hold up through regular trading Thursday, the one-day stock decline will be the biggest in Facebook's history.

Looking ahead to the rest of 2018, Facebook CFO Dave Wehner warned that revenue growth for the third- and fourth-quarters would decelerate in the high-single digits because of factors that include more data privacy options and the promotion of newer initiatives like Stories and Watch that could impact revenues growth.

Facebook also missed the revenue projections of most analysts for the second quarter.

"The core Facebook platform is declining", said Brian Wieser, an analyst at Pivotal Research Group. Revenue from these regions, however, is far below what Facebook rakes in from the US and Europe. That same number fell in Europe, where the company has had to comply with a strict new privacy law, known as GDPR, the Washington Post reported. Facebook disrupted some business by putting in place new rules to get all political advertisers to verify their identities.

Facebook has shown that it can not sail forever forward while facing various storms, including Cambridge Analytica and the Russian government's use of the social media platform to sow divisions amongst Americans during the 2016 presidential campaign.

The threat of additional regulatory setbacks remains a concern, according to analysts.

Facebook's daily active users didn't grow at all in the United States, its most lucrative ad market, and the social network actually lost 3 million DAUs in Europe as a result of new privacy regulations.

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