Facebook shares plunging in after-hours trading, now down 9%

Facebook shares plunging in after-hours trading, now down 9%
Facebook's stock price on Thursday through 1:24 p.m. PDT. (Data by YCharts

Facebook's shares plummeted as much as 11% in after-hours trading after the social network released its first-ever earnings report that showed it met revenue expectations but was spending heavily.

The Menlo Park, Calif., company reported quarterly revenue of $1.18 billion on profit of 12 cents a share. Analysts surveyed by Thomson Reuters had expected revenue of $1.15 billion and profit of 12 cents a share.

Facebook posted a second-quarter loss of $157 million, or 8 cents a share. But on an adjusted basis, after accounting for restricted stock awards, the company posted a profit of 12 cents a share that was on target.

For the same quarter a year ago, Facebook reported revenue of $895 million and profit of $240 million.


Although Facebook's numbers came in on target, its costs and expenses totaled $1.93 billion, an increase of 295% from the second quarter of 2011.

Among its big expenses: marketing and sales totaled $392 million, up 308% from the year-earlier quarter; research and development was up 612% to $705 million; and general and administrative was up 458% to $463 million.

Facebook shares, which ended the day down 8.5% at $26.84, began plunging shortly after the earnings were released. They fell as much as 11% in after-hours trading but had recovered slightly by 2:27 p.m. PDT, when they were down 9% to $24.38.

"Facebook delivered revenue upside, but it didn't translate to earnings," said Michael Pachter, an analyst at Wedbush Securities. "I am surprised the stock is down -- I don't know what people expect."

Pachter said he thought company officials would explain the high levels of spending -- which includes twice as much on research and development and marketing -- during Facebook's earnings call scheduled at 2 p.m. PDT.

"When they explain it, I think investors will be more comfortable," he said.

Mark Mahaney, an analyst at Citi, called the earnings a "modest beat" and said he, too, was "hoping for a lot of disclosure" on the conference call.

"We don't view these results as dramatically good or bad," he said. "Key questions remain: the future of FB mobile monetization and the future of FB user engagement."


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