Facebook (NASDAQ:FB) stock nosedived more than 23% in the extended session Wednesday after the social network giant reported 2Q/18 earnings results that bested analyst estimates on the bottom line but missed on the top line.
The Menlo Park, Calif.-based company saw its second-quarter earnings-per-share (EPS) come in at $1.74, $0.03 better than expected by analysts polled by FactSet. However, revenue, which rose to $13.04 billion from $9.16 billion in the year-ago period, fell short of the $13.35 billion expected by the same analysts. Mobile ads revenue, which also came up short of analysts’ estimates, represented 91% of the company’s advertising revenue. Meanwhile, total costs and expenses jumped to $7.36 billion, up 50% on a year-over-year basis (y/y).
On the user front, Facebook reported 1.47 billion daily active users, while Wall Street estimates were for 1.49 billion; the company reported 2.23 billion monthly active users (MAUs) as analysts expected 2.25 billion.
While MAUs are up 11% from a year ago, the growth marks the slowest pace in more than two years. Facebook also suffered a decrease in its base of daily users in Europe with users in the region falling from 282 million at the end of March to 279 million at the end of June. To make matters worst, FB’s CFO David Wehner told investment analysts on a conference call following the report that Facebook’s revenue growth rate – a metric that measures how fast a company’s business is expanding – will drop on a y/y basis by “high single digits” in this quarter and in the fourth quarter. Furthermore, Wehner signaled that the company’s operating margin, another key measure of profit, would sink to the “mid-30s” over the next couple of years, down from 44% currently.
Pressed by Barclays’ Ross Sandler and other analysts who expressed surprise at his “deceleration” statement, Wehner said that operating margin would be negatively affected by “a combination of factors,” including currency fluctuations and the introduction and promotion of new ad products like the “stories” feature on FB and Instagram.
Adding to the stock’s bleeding, Facebook Chief Executive Mark Zuckerberg, whose Wednesday’s stock plunge cost him nearly $18 billion in net worth losses, said that his company’s bottom line could be affected by costly measures it is taking to improve safety and security for its users.
“Overall, this is a critical year for Facebook,” Zuckerberg said on the conference call.
As of writing, Facebook stock is changing hands at $174 per share – down 44 points. Shares had hit a new high of $218.62 heading into second-quarter results.
Wednesday’s plunge wiped out as much as $150 billion of the company’s market value in under two hours.