Facebook Inc. saw the first signs of user disenchantment in the midst of public scandals over privacy and content, with second-quarter revenue and average daily visitors missing analysts’ projections.
Facebook’s stock price sank as much as 25% in extended trading.
The social media giant said it had 1.47 billion daily active users in June, compared with the 1.48 billion average of analysts’ estimates compiled by Bloomberg. Revenue, fueled by mobile advertising sales, increased 42% to $13.2 billion. Analysts had projected $13.3 billion.
The company’s user growth fell short of expectations in the same quarter Chief Executive Mark Zuckerberg testified for 10 hours in Congress on data privacy issues. It also came as Europe implemented strict new data laws, which Facebook had warned could lead to fewer daily visitors in that region. The company also was bombarded by public criticism over its content policies, especially in countries such as Myanmar and Sri Lanka where misinformation has led to violence.
“The core Facebook platform is declining,” said Brian Wieser, an analyst at Pivotal Research Group.
The company’s user base was unchanged in its biggest market — the United States and Canada — at 185 million daily users, while declining in Europe to 279 million. Overall, average daily users increased 11% from the same period a year earlier.
The Menlo Park 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.
This was the first time Facebook had missed analysts’ revenue projections since 2015.
Facebook’s shares closed Wednesday at $217.50, a record high, before the company released its quarterly report. The stock had advanced 23% this year.
The social network, despite the drama of the last few months, still holds one of the world’s most valuable sets of data on what people are interested in, and it makes that audience easily available to advertisers. But its ad growth engine contended with disruptions in its most lucrative markets. In Europe, Facebook had to respond to new privacy rules. In North America, an effort to get all political advertisers to verify their identities may have halted some purchases as the company worked through its broad definition of what is considered political.
The company remains in a dominant position in mobile advertising alongside Alphabet Inc.’s Google. Facebook said mobile made up 91% of its ad revenue last quarter, up from about 87% in the year-earlier quarter.
As Facebook grows, reaching a majority of the world’s internet-connected population, it is becoming more reliant on properties other than its main social network to fuel growth. It owns three other properties with more than 1 billion users: WhatsApp, Messenger and Instagram. Instagram’s business model is so far the most mature, and analysts said it probably contributed meaningfully to the company’s revenue in the quarter, though Facebook doesn’t break out sales for the app.
Facebook has said it will increase spending to make investments in video content, and on new bets such as artificial intelligence and virtual reality. The company is also rapidly expanding its real estate around the world to accommodate a hiring spree, which includes thousands of new workers to help combat foreign election manipulation on the site. (In 2016, Russia ran a campaign on Facebook to cause political unrest in the United States around the presidential election.) The company said headcount was 30,275 as of June 30 — an increase of 47% year over year.
The company has been working to convince users it has their best interests at heart, after reports of Russia’s interference and disclosures that a political consulting firm gained access to private personal information. Zuckerberg said in January that he would adjust the news feed to make sure people spend more time on Facebook with meaningful content from their friends and family members — a move the company has said would decrease user engagement with the site.