Facebook Shares Sink; Further Growth Drops Expected

Facebook Shares Sink; Further Growth Drops Expected

"High expectations can be a remarkable burden, and the reaction is often brutal when they are missed, but the revenue miss was slight, and $13.2 billion is not to be sniffed at".

The warning, which came during a conference call for its second-quarter results after markets closed on Wednesday, sparked a share sell-off and drop of 24% in after-hours trading.

In recent years, investors - from individual traders to the world's largest hedge funds - have snapped up shares in these companies, which include Facebook, Amazon, Apple and Google's parent company, Alphabet.

Zuckerberg even noted during a call with analysts that "we're investing so much in security that it will significantly impact our profitability". We're starting to see that this quarter.

Mark Zuckerberg is also counting the cost of user disenchantment with Facebook.

At the same time, it could be an indication that the appeal of Facebook is slowly wearing thin, especially following all the privacy issues it has recently suffered.

According to the company, Facebook Messenger and WhatsApp show promise as new advertising platforms, although chief operating officer Sheryl Sandberg doesn't believe they'll contribute strongly for a few years yet.

Facebook reported its user base was still growing but not as fast as some expected.

Despite the record stock price tumble, the tech giant still made $13.2 billion (€11.3 billion) in the second quarter of 2018, a year-on-year rise of over 40 percent.

The revenue guidance from the company was "unprecedented", said Gene Munster, an analyst at Loup Ventures, in a note to investors.

"This is a direct result of scale as it becomes increasingly hard to grow at such high rates when a company hits this size", Windsor wrote.

Facebook's shares recovered somewhat after the call.

"Weaknesses in AI are forcing [Facebook] to keep hiring humans to do the jobs that the machines are incapable of", he said.

Brian Wieser at Pivotal Research Group said the company appears to have hit a "wall" on growth in advertising.

For Facebook, a Wall Street darling even while members of Congress grilled its executives on Capitol Hill, the suits mark a turning point.

The company has faced tremendous scandals from both the Cambridge Analytica debacle and many questions from users about fake news and misinformation.

Facebook Inc.'s scandals are finally hitting the company where it hurts: growth.

Facebook also warned that the toll would not be offset by revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns.

Dismal revenue, which initially pulled the stock down almost 9 percent on Wednesday, clearly was not the end for wounded investors.

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