Facebook shares fall as user growth slows

Facebook loses one million EU users to GDPR

Facebook loses one million EU users to GDPR

Facebook shares fell as much as 24 percent in after-hours trading Wednesday after sales growth didn't meet expectations - and the social media giant said it would continue to decelerate.

Analysts attributed the user growth shortfall largely to European privacy rules that went into effect in May.

The firm, which is facing backlash for its handling of fake news and privacy, said it had 2.23 billion monthly active users at the end of June.

The Menlo Park, California-based company reported net income of $5.11 billion, or $1.74 a share, compared with analysts' average estimate of $1.71 a share, according to data compiled by Bloomberg.

"And we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both the third and fourth quarters".

Facebook's shares fell 7.6 percent after-hours after closing at $217.50.

"This is a clear inflection point for Zuckerberg & Co.as the company's advertising fortress and MAU metrics still look "well intact" despite the massive potential headwinds caused by Cambridge and the overall privacy worries (GDPR) in Europe although challenges remain".

The company did beat on earnings, which rose 32% to $1.74 per share against an expected $1.72. Facebook said mobile made up 91 percent of ad revenue in the recent period, compared with about 87 percent a year earlier.

According to the research firm, Facebook-owned Instagram is making up for some of the slowdown in growth at the social network and will generate $8.06 billion in worldwide ad revenue this year.

Still, the loss of users should not have shocked investors because Facebook has said for the past two quarters that it was starting to hit the zenith of user growth in its most mature markets like North America.

Facebook's daily active users in Europe declined by 3 million amid the new regulation.

Almost all social media services have received greater scrutiny since US intelligence agencies in January 2017 revealed that organizations tied to the Russian government had seeded content on the platform to shake up the 2016 USA presidential election.

"We also believe "considerable strength" from the Instagram side of the house has neutralized any soft spots on the core Facebook platform in our opinion".

"After a key 1Q earnings test in April which Facebook performed well while passing the regulatory hearings in both United States and Europe with flying colors, now the focus for the Street is around 2Q as another "pivotal barometer" this week to gauge any fundamental damage (advertising, MAU growth) post the Cambridge situation and News Feed overhaul moves".

This year has not been kind to Facebook shareholders.

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