Facebook warns of ‘significant’ slowdown in revenue growth
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Facebook warned that the pace of its revenue growth would “decelerate significantly” in forthcoming quarters, sending its shares down in after-hours trading.
The warning from the social network came as it posted bumper revenues and profits for the second quarter. Mark Zuckerberg’s social media company reported a 56 per cent rise in second-quarter revenues to $29.1bn, beating analysts’ expectations of $27.9bn.
The company attributed the growth to a 47 per cent increase in the price of ads, signalling strong demand from brands.
Facebook’s net income jumped 101 per cent year-on-year to $10.3bn, or $3.61 a share, well above consensus estimates of $8.7bn, or $3 a share.
However, the company, which gets the majority of its revenues from advertising, cautioned that pace of revenue growth would “decelerate significantly on a sequential basis as we lap periods of increasingly strong growth” underpinned by the pandemic recovery.
Facebook’s earnings at a glance
Actual versus estimates
Revenue: $29.1bn vs $27.9bn
Net income: $10.39bn vs $8.7bn
EPS: $3.61 vs $3.00
Ad sales: $28.58bn vs $27bn
Monthly active users: 2.9bn vs 2.9bn
Source for estimates: S&P Capital IQ and Refinitiv
Shares fell nearly 4 per cent in after-hours trading to around $360.
For now, Facebook appears to have shrugged off the impact of Apple’s new privacy policies, which ban apps and advertisers from collecting data about iPhone users without their explicit consent. Facebook had repeatedly warned that the changes could hurt ad spending, as many users are expected to reject being tracked by the app.
However, it cautioned that the changes would have a “greater impact” in the forthcoming quarter than the previous one.
Monthly active users rose 7 per cent year-over-year to 2.9bn as of June 30, in line with expectations.
Facebook has been exploring other revenue streams in the face of the Apple update, since access to data for ad targeting may become more difficult.
In particular, it has deepened a push into ecommerce, adding new tools for online shopping and payments that could grow in use as pandemic restrictions lift.
The company has also increased its investment in virtual and augmented reality, hiring 10,000 in the sector as it joins the race against rivals such as Apple to build the next computing platform. Earlier this week, Facebook announced that it was creating a unit dedicated to building out the ‘metaverse’ — a shared virtual and augmented reality space where users can interact.
“This is going to lead to entirely new experiences and economic opportunities,” Zuckerberg said on the call with analysts, adding: “I expect people will transition from seeing us primarily as a social media company to seeing us as a metaverse company.”
Facebook was in the spotlight last week after a testy stand-off with president Joe Biden, who accused the company of “killing people” by failing to adequately clamp down on coronavirus vaccine misinformation.
The company rebuffed the claims, suggesting the Biden administration was using Facebook as a scapegoat to deflect attention from its difficulties in boosting numbers of the vaccinated.