Facebook stock drops 20% as growth falls and extra security costs take toll on profit
Facebook shares fell by more than 20% after the company's user growth and revenue missed investor expectations.
Shares in the company initially fell as much as 12% in after-hours trading, before losses peaked at 24% on Wednesday night, after the social network warned investors that growth would continue to decelerate.
Facebook's monthly active user count was 2.23 billion, slightly behind the 2.25 billion forecast by analysts.
Although Facebook's monthly active users were up 11% year-on-year, growth had fallen flat in the US and Europe, its key advertising markets. Europe's fall was partly down to the roll-out of GDPR, the company told investors. Revenue estimates also fell short, reaching 13.3 billion US dollars, as the company continues to deal with fake news and privacy issues in the wake of the Cambridge Analytica scandal by investing in improved safety and security controls.
"As I've said on past calls, we're investing so much in security that it will significantly impact our profitability," CEO Mark Zuckerberg said in an earnings call. "We're starting to see that this quarter."
Mr Zuckerberg's own net worth also took a hit as a result of the share drop, losing $16.8bn (£12.8bn) in a day and knocking about a fifth off his net worth. Facebook warned investors that it expected revenue gains to slow down because of users utilising options to limit advertising on the social network.
"Our total revenue growth rate decelerated approximately seven percentage points in Q2 compared to Q1," warned chief financial officer David Wehner. "Our total revenue growth rates will continue to decelerate in the second half of 2018.