Q2 earnings aftermath: FB share prices drop 20% in after-hours trading

Facebook missed on ad revenue projections, reached $13.04 billion compared to consensus estimate of $13.16 billion

by exchange4media Staff
Published - Jul 26, 2018 9:00 AM Updated: Jul 26, 2018 9:00 AM
Facebook reported its second-quarter earnings after the close of the stock market on Wednesday. Shares were down as much as 20 percent. At the current afterhour’s prices and given its market cap at the close Wednesday, Facebook is set to lose more than $123 billion in market value, said media reports.

The company has been struggling for months, from ongoing fallout from the spread of Russian propaganda to the aftermath of the Cambridge Analytica scandal, and severe controversy over fake news and disinformation.

The social media platform said that 2.5bn people were using any of its range of apps each month, including Instagram and WhatsApp. Though Facebook-specific global DAU rates were up 11 percent y-o-y - with growth led through users in India, Indonesia and the Philippines - it was less than Wall Street was projecting. European DAUs were down from 282mn last quarter, which were a reflection of the effect of the enactment of the General Data Protection Regulation (GDPR) in the European Union.

"GDPR has not had a significant (ad) revenue impact, but we also recognize it wasn't fully rolled out this quarter," said Facebook’s COO, Sheryl Sandberg on a call with analysts, adding the company recognizes there could be more risk for decreased numbers in Europe.

The North American DAUs remained flat despite the fallout from the Cambridge Analytica data leak scandal and fake news issues. However, average revenue per user in the region rose despite the lack of growth. It reached $25.91 per user, up from $23.59 during the first quarter.

Facebook also surprisingly missed on advertising revenue projections, reached $13.04 billion compared with the StreetAccount and FactSet estimate of $13.16 billion.

Facebook said it expected its revenue growth rates to be lower than the year prior, especially in the second half of this year. Sequentially in the third quarter and fourth quarter, it expected the decline to be as much as high single digit percentages. Some reasons included Facebook investing in Stories, which has lower levels of monetization, as well as improving privacy features as a result of GDPR and other user demands. It also is bracing for currency fluctuations as the dollar gets weaker.

"We continue to focus our product impact on putting privacy first, and that's going to have some impact on revenue growth," said Facebook’s Chief Financial Officer, David Wehner.

Highlights:
  • Earnings per share: $1.74 vs. $1.72 per a Thomson Reuters consensus estimate
  • Revenue: $13.23 billion vs. $13.36 billion per a Thomson Reuters consensus estimate
  • Global daily active users (DAUs): 1.47 billion vs. 1.49 billion, according to a StreetAccount and FactSet estimate
  • North American DAUs: 185 million vs. 185.4 million, according to a FactSet estimate
  • European DAUs: 279 million vs. 279.4 million, according to a FactSet estimate
  • Average revenue per user (ARPU): $5.97 vs. $5.95, according to a StreetAccount and FactSet estimate
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