Facebook (NASDAQ:FB) share price sinks on growth slowdown warning

Sometimes even beating expectations is not enough…

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The Facebook Inc (NASDAQ: FB) share price has taken a dip to the downside following its second-quarter results. Despite delivering a double on earnings and revenue, shares in the networking giant fell in after-hours trade.

At the time of writing, the Facebook share price is fetching US$373.28. However, shares dropped 3.56% to US$360.00 in after-hours trade.

Let’s delve into what the company shared with investors this morning that left them wanting more.

Growth at scale

While you wouldn’t pick it based on investor sentiment this morning, Facebook delivered impressive growth figures for its latest quarter.

According to the release, revenue surged by 56% year-over-year (YoY) to US$29.08 billion in the second quarter. A return to advertising spending led to a 47% YoY increase in the average price per ad. At the same time, the number of ads delivered increased.

Facebook managed to increase its operating margin by containing the lift in expenses. While revenues jumped, expenses climbed to a lesser extent with a 31% increase. As a result, income from operations more than doubled to US$12.37 billion. Impressively, the company’s margin expanded from 32% to 43%.

Furthermore, analysts were forecasting earnings per share (EPS) of US$3.03. Shareholders can relish Facebook beating expectations with an EPS of $3.61. Another positive for the Facebook share price from the quarterly report.

Importantly, Facebook’s monthly active users have continued to grow. At the end of June, Facebook boasted MAUs of 2.9 billion, representing an increase of 7% YoY.

The Facebook share price dampener

It wasn’t all sunshine and rainbows from the company’s latest result. Investors have been rattled by the outlook suggesting a significant deceleration in growth rates for the third and fourth quarters. This is because Facebook will be comparing its revenue and earnings to previous quarters of strong performance.

Additionally, the company stated:

We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter. This is factored into our outlook.

Uncertainty appears to be the main fact impacting the Facebook share price overnight. Until there are more guarantees about what may happen next with regard to potential changes in policy and growth, investors could be wary.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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