Why Did Facebook's Stock Plunge Despite Surprise Earnings?

[Image source=AP Yonhap News]

[Asia Economy Reporter Yujin Cho] Facebook, the world's largest social networking service (SNS), reported a surprise second-quarter net profit more than double that of a year ago, but its stock price plunged on concerns that growth will slow from the third quarter.

On the 28th (local time), Facebook announced its second-quarter earnings, reporting revenue of $29.077 billion (approximately 33.5548 trillion KRW), a 56% increase compared to $18.687 billion in the same period last year. This exceeded Wall Street estimates of $27.81 billion.

Net profit reached $10.394 billion, up 101% from $5.178 billion in the same quarter last year. Earnings per share also recorded $3.61, surpassing market estimates of $3.03.

This performance growth was driven by an increase in advertising revenue. Facebook's second-quarter advertising revenue rose 47% year-over-year. The number of ads delivered to approximately 3 billion subscribers increased by about 6%, and the average price per ad also rose, leading to higher revenue and net profit.

Benefiting from COVID-19, the number of monthly active users (MAU) during the second quarter reached 2.9 billion, and daily active users (DAU) reached 1.91 billion, up 7% compared to the same period last year.

However, Facebook expects revenue growth to slow in the second half of this year. It is anticipated that targeted advertising revenue will shrink significantly due to Apple's data collection restrictions, and the benefits from COVID-19 will begin to fade as vaccination rates increase.

Facebook stated in its earnings report, "We expect revenue growth rates to slow significantly in the third and fourth quarters of this year," adding, "The impact on advertising revenue from Apple's mobile operating system (iOS) update is expected to be fully reflected starting in the third quarter." Following this outlook, Facebook's stock price showed a decline of over 3% in after-hours trading on the day.

To prepare for the impact on targeted advertising revenue, Facebook is exploring expansion into other revenue models such as online shopping and payment services. Facebook's recent increased investment in augmented reality and its vision to transform Facebook into a metaverse (virtual space) company within the next five years are in line with this strategy.

This content was produced with the assistance of AI translation services.