• Facebook shares traded 23% lower at one point
  • Main reason was unexpectedly poor revenue report
  • CFO expects more of the same for the rest of the year

Facebook’s share price dropped 19% yesterday following an earnings report that was much weaker than expected. The drop wiped nearly $120bn off the company’s market value and was the biggest single-day decline in US stock market history.

Facebook published its Q2 earnings report on Wednesday, and its share price subsequently dropped up to 23% in after-hours trading. Although revenue was up by 42%, it still didn’t meet analysts’ expectations.

The number of users who are active on a daily basis increased by only 22 million, the lowest figure since 2011. The firm’s CFO cautioned that revenue growth would drop by “high single-digit percentages” for the rest of 2018.

Over the last two years, Facebook has gone through several crises. It started with Russian “interference” during the 2016 election. Then came the Cambridge Analytica data privacy scandal, and the launch of GDPR in Europe cost Facebook a million users.

Responding to worries about fake news, privacy and hate speech, Facebook promised to employ 20,000 additional workers to look after moderation and security issues. That reduced its revenue growth, and the site has also basically saturated its original North American core market.

The platform has been unable to grow beyond 185m users in the US and Canada this year, and it now has to look for growth abroad.

Stock markets generally traded lower yesterday. The S&P 500 dropped by 0.3% to 2,837.44 yesterday, while the Nasdaq Composite Index fell by 1% to 7,852.18 after closing at record levels on Wednesday.

The Dow Jones Industrial Average went against the trend, increasing by 0.4% to 25,527.07. This might be because Facebook isn’t included in any of its 30 components.


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