Facebook stock price falls on slowing growth forecast

Despite a strong second quarter and investments in security and privacy in the wake of the Cambridge Analytica scandal, Facebook’s share price fell more than 20% in after-hours trading.

The social networking firm reported second-quarter revenue of $13.2bn, up 42% compared with the same period a year ago, and profit of $5.1bn, an increase of 31%.

The company also saw growth in user numbers for the quarter, with daily users up 11% on the previous year to 1.47 billion on average and monthly users also up 11% to 2.23 billion – but user growth was below Wall Street estimates of 1.49 billion and was flat in the US and down by one million in Europe, both of which are key advertising markets for Facebook.

Mobile advertising revenue, another key indicator for investors, represented approximately 91% of advertising revenue, up from 87% of advertising revenue in the second quarter of 2017.

Facebook founder and CEO Mark Zuckerberg was upbeat in his official statement, saying: “Our community and business continue to grow quickly. We are committed to investing to keep people safe and secure, and to keep building meaningful new ways to help people connect.”

However, investors appear to have taken their cue from chief financial officer David Wehner’s statement during a conference call with analysts that revenue growth would “continue to decelerate in the second half of 2018”.

“We expect our revenue-growth rates to decline by high-single-digit percentages from prior quarters sequentially in both Q3 and Q4,” he said, adding that Facebook also expects expenses to grow 50% to 60% from 2017.

Zuckerberg said Facebook’s investments in security will have a “significant impact” on profitability. “We are starting to see that this quarter.”

These investments come in the wake of the Cambridge Analytica data sharing scandal and are part of efforts by Facebook to win back the trust of users. The company has also come under increased pressure around the way it collects data since the EU’s General Data Protection Regulation (GDPR) came into effect in May.

Zuckerberg said 2.5 billion people use at least one of Facebook’s apps each month, which analysts said indicates an effort by the company to show the company’s future growth is more likely to come from these areas of the business than the core Facebook platform.

In the UK, Facebook is running out of time to appeal against the Information Commissioner’s Office (ICO) decision to issue a monetary penalty of £500,000 ($659,000) after finding the social networking firm guilty of two contraventions of the UK Data Protection Act 1998.