Facebook shares plunge 8.6 percent after missing estimates on monthly active users

Facebook shares plunge 8.6 percent after missing estimates on monthly active users

And the company told Wall Street the numbers won't get any better this year. A year ago, that growth rate was still at 17%.

More disconcertingly for analysts and investors, though, company officials warned on the call that its annual growth rate would decline by the high single digits, percentage wise, in the second half of the year. "It just seems like the magnitude is beyond anything we've seen".

For Facebook, financial stumbles are rare.

Facebook also reported that its user base in Europe had shrunk because of a new privacy law there, marking one of the few times in the social network's history that it has reported a user decline in any region.

"So far, there has been no evidence that shows that controversies, such as the spread of fake news, Russian interference in the US elections, and the Cambridge Analytica scandal, have prompted advertisers to divert ad dollars", says Haris Anwar, senior analyst at Investing.com. The legislation, known as the General Data Protection Regulation, cost Facebook about 1 million users in Europe, he said. And it continued to suffer fallout from investigations into Russian manipulation of the platform during the 2016 USA presidential election.

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.

According to the research firm eMarketer, Facebook is expected to hold an 18 percent share of the $273.29 billion worldwide digital ad market, behind Google's 31 percent.

The consensus among analysts polled by FactSet had been for revenue to hit $13.34 billion, which would be a 43 percent gain, and earnings per share of $1.71, up 30 percent. The company's user base was unchanged in its biggest market, the USA and Canada, at 185 million daily users, while declining in Europe to 279 million daily users.

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Total expenses in the second quarter surged to $US7.4 billion, up 50 per cent compared with a year ago. Analysts projected $13.3 billion.

CFO Wehner attributed the slowing growth to currency fluctuations, as well as the company's focus on "growing new experiences such as stories" and "giving people who use the services more choice around privacy".

In the final minutes of trading on Wednesday, shares hit $217.50, an increase of 32 percent in the last 12 months.

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

For almost two years, Facebook has appeared bulletproof despite a series of scandals about the misuse of its giant social network. 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.

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. "We think that's the right thing to do for the business", he said.

Facebook CEO Mark Zuckerberg was in Europe last quarter discussing data policies with lawmakers. The company doesn't break out Instagram's revenue.

Facebook used to be made out of corporate Teflon.

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