Facebook's shares tumble as growth disappoints

Marcus Newton
July 26, 2018

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.

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.

Analysts polled by Bloomberg expect the social-media giant to report adjusted earnings of $2.01 a share on revenue of $13.33 billion, both above last quarter as well as the same period of 2017.

"And we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both the third and fourth quarters". In terms of revenue, the tech giant earned $13.23 billion but missed Thomson Reuters' estimates of $13.36 billion.

"This is a clear inflection point for Zuckerberg & Co.as the company's advertising fortress and MAU metrics still look "well intact" despite the massive potential headwinds caused by Cambridge and the overall privacy worries (GDPR) in Europe although challenges remain". Total expenses in the second quarter surged to $7.4 billion, up 50 per cent compared with a year ago.

Although Facebook shares were in a slump after the Cambridge Analytica scandal broke earlier this year, the stock had risen sharply and hit record levels this month.

Operating profit margin, which fell to 44 percent in the second quarter from 47 percent a year ago, will sink to the "mid-30s" for more than two years, Chief Financial Officer David Wehner said in investor guidance.

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Only months after a data privacy scandal, Facebook is seeing fewer frequent users than it expected.

Facebook attracted about 20% of digital advertising spending in the USA past year, according to research firm eMarketer.

"We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect", he said in the company's earnings release.

"We also believe "considerable strength" from the Instagram side of the house has neutralized any soft spots on the core Facebook platform in our opinion".

Almost all social media services have received greater scrutiny since United States intelligence agencies in January 2017 revealed that organisations tied to the Russian government had seeded content on the platform to shake up the 2016 USA presidential election. Facebook and Instagram ad spending through 4C rose 48 percent year over year, according to Goldman.

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.

Here is one interesting figure; Facebook (NASDAQ:FB) is still stuck at 241 million monthly U.S. & Canada users, and it is the same figure from the last quarter.

Other reports by MaliBehiribAe

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