NEW YORK: Facebook Inc's stock fell as much as 24 percent after hours on Wednesday over concerns about the impact of privacy issues on the social media company's business, with executives warning that revenue growth would slow and expenses would rise.
The plummeting stock price wiped out about US$150 billion in market capitalization in under two hours.
The company had cautioned investors to expect a big jump in costs because of efforts to address concerns about poor handling of users' privacy and to better monitor what users post. Total expenses in the second quarter surged to US$7.4 billion, up 50 percent compared with a year ago.
"Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4," said Chief Financial Officer David Wehner.
Expenses are expected to grow 50 percent to 60 percent compared with last year as the company invests in security, marketing and content acquisition, he said.
"Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis," Wehner said, adding that margins would be down for more than two years.
Facebook's operating margin fell to 44 percent in the second quarter from 47 percent a year ago.
The new General Data Protection Regulation (GDPR) in the European Union forced several changes to Facebook's privacy terms and sign-up process.
"When it comes to much slower revenue growth, they’re talking about currency headwinds, but more we think it’s due to slower user growth given GDPR and more focus on privacy," Morningstar analyst Ali Mogharabi said.
Facebook saw monthly active users in Europe decline about 1 million people amid the new regulations, Facebook Chief Executive Mark Zuckerberg said on the conference call.
A data privacy scandal involving the political consulting firm Cambridge Analytica and misinformation on WhatsApp contributing to mob killings in India have added to the pressure on Facebook to re-evaluate how its services maintain security and decorum.
Facebook's revenue grew at its slowest pace in almost three years. Sales grew 14 percent to $13.2 billion in the second quarter compared with $9.3 billion a year ago.
The company reported $5.1 billion in profit, or $1.74 per share, compared with the average estimates of $5.1 billion and $1.72 per share among research gathered by Thomson Reuters.
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