Facebook Stock Decline Is Largest One-Day Drop in U.S. History

Facebook shares sink 8% as Q2 revenue and user growth misses analyst estimates

David Wehner, Facebook's CFO, said during a call on Wednesday that the company's decision to give users "more choices around data privacy" following the Cambridge Analytica scandal and GDPR compliance "may have an impact on our revenue growth".

Facebook has lost around one million users in Europe thanks to new data protection regulations.

At one point during the call, Facebook shares were trading down as much as 24 percent, an unprecedented drop for a large firm. While the company posted an earnings beat, revenue was below analysts' guidance as the company raked in $13.23 billion in sales, below the $13.23 billion that analysts were calling for.

Factors contributing to Facebook's slowing sales growth include currency-exchange rates, compared with "the tailwinds we have experienced over the last several quarters", Wehner said.

Speaking of market-leading tech stocks, Facebook's mega-cap counterparts Apple, Amazon, Netflix, and Alphabet all lost more than 1.5% at their overnight lows, and the Nasdaq 100 index dropped 1.4% in regular trading hours.

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Nearly all of Facebook's revenue - $13 billion of the total $13.2 billion - came from online advertising, a sector dominated by the California social network along with Silicon Valley rival Google. The report said the social media site's user base and earnings had not grown as much as expected. "Instagram has over 1 billion users, and all Facebook apps (Facebook, WhatsApp, Messenger, and Instagram) have 2.5 billion unique monthly users".

In fact, the call with Zuckerberg and his colleagues only made things worse for Facebook's share price.

In the wake of the Cambridge Analytica data-privacy scandal, "Legal/regulatory developments have led to changes meant to support FB's platform and users, but they will notably restrain growth and profits for at least the next couple of quarters, in our opinion", Scott Kessler of CFRA Research wrote in a note.

But there's also been a notable slowdown in user growth.

The company's revenue and subscriber growth missed Wall Street's expectations, and then company officials warned of slowing growth ahead.

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Specifically, Wieser says new European rules about company obligations to protect consumer privacy known as GDPR may prove to be expensive for the company in the long run.

"I think many investors are having a hard time reconciling that deceleration", Brent Thill, an analyst at Jefferies LLC, told Facebook executives, asking for a little more clarity on the reasoning.

'The real concern is the revenue trajectory, ' one investor told the Financial Times when asked about Facebook's share price.

That almighty crash comes as the result of Facebook shares collapsing by 18% when the New York Stock Exchange opened its doors.

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