Facebook has been facing problems after problems for the last couple of months. Earlier this year, a data leak put at risk the private data of 87 million users. Facebook was brought to court for this and to see how they were handling fake news on their platform.
Today, Facebook announced its slowest ever growth rate in the second quarter of 2018 and warned that its revenue growth would further decelerate. Soon after this announcement, Facebook’s stock price plummeted more than 20% during after-hours trading. That’s roughly 1/5th of the company’s value.
In the earnings report for Q2 2018, Facebook missed the prediction made by Wall Street on the revenues and user growth of $13.34 billion. However, they still put up an earning of $13.2 billion which is a 42% year-on-year increase. The number of monthly active users also saw a growth of about 11% to 2.23 billion. Daily users were also up to about 1.47 billion.
Defending the shortcomings in the revenues, Facebook’s CEO Mark Zuckerberg said,
We are investing so much in security that it will have a significant impact on our profitability.
Major Loss in Value
Facebook’s share price closed at $217.50 which was a record high but it fell to around $172 after the earnings call. In just two hours, Facebook’s market cap drop was roughly $123 billion. For perspective, Facebook lost more value than most startups are ever worth.
One of the reasons for the share price drop was Facebook’s slowest ever user growth. This time around, Facebook’s monthly user count grew just 1.54% as compared to 3.14% from the last quarter.
Daily active users also took a hit, growing just 1.44% instead of 3.42% in the last quarter. The user count actually dropped for the first time in Europe from 377 million to about 376 million. Facebook saw no significant changes in their user growth or loss in the US and Canada, hovering at about 241 million.