The lower-than-expected users and revenue shows that Chief Executive Zuckerberg's cash-producing machine may not be totally impervious to controversy.
Facebook Inc saw the first signs of user disenchantment in the midst of public scandals over privacy and content, with second-quarter revenue and average daily visitors missing analysts' projections. While the company posted an earnings beat, revenue was below analysts' guidance as the company raked in $13.23 billion in sales, below the $13.23 billion that analysts were calling for.
Shares plunged as much as 24% after Chief Financial Officer David Wehner said revenue growth rates would decline in the third and fourth quarters.
Even after Facebook CEO Mark Zuckerberg was hauled in front of lawmakers on both sides of the Atlantic and federal agencies began to probe Facebook, prompting calls for increased regulation, investors and advertisers were undeterred, propelling the stock to new highs.
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The company remains in a dominant position in mobile advertising alongside Alphabet Inc's Google. He crowed about Instagram, calling it an "amazing success" and said he believed that the unit grew twice as quickly under Facebook than it would have.
Facebook said it had 1.47 billion daily active users in June, compared with the 1.48 billion average of analysts' estimates compiled by Bloomberg.
Facebook's daily active users for the quarter were 1.47 billion, shy of the 1.49 billion forecast by StreetAccount and FactSet.
The company earned $5.1 billion, or $1.74 per share, up 31% and above analysts' estimates of $1.71.
Facebook shares went into a freefall on Wednesday (Jul 25) as a stunningly weak financial outlook raised fresh concerns for the social networking giant as it tries to recover from the impact of data protection scandals and investigations. Facebook has largely saturated in the USA and Western European markets, and is now looking to countries such as Brazil, India and Indonesia for new users.
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Growth in the number of users who logged in each day fell short, too, up 11 percent year-over-year at 1.47 billion but still less than the 1.49 billion anticipated.
Facebook shares have increased 23 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 6.5 percent.
Still, Zuckerberg assured investors that Facebook continues to see growth on its core platform, as well as its other properties, which include Instagram, WhatsApp and Messenger. The company said headcount was 30,275 as of June 30 - an increase of 47 percent year over year.
Wehner said the "deceleration", as he termed it, is "a combination of factors", including the rising US dollar; what Wehner called the company's newfound "focus on growing engaging new experiences like Stories and promoting of those; giving greater controls to users of the service people who use service for privacy".
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