Facebook Posts Strong Quarterly Results, Stock Drops 3.5%

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Principal Points

• Facebook’s second-quarter performance shows strong growth, stock falls 3.5% in overnight trading
• Broad markets trade in a choppy environment after Fed Chair Powell delivers his statement

Facebook Inc. posted strong growth numbers for its second-quarter performance on Wednesday after the bell. Beating analyst expectations, Facebook’s profit doubled from a year earlier, reaching $10.39bn, or $3.61 a share. Revenue for the company increased 56% to $29.08bn. The second-quarter financials from the social media giant were boosted by significant digital ad spending amounting to $28.58bn. Facebook’s platforms have accommodated as many as 1.91bn active daily users for the quarter ended June. On a monthly basis, the company reported 3.5bn users across its platforms.

Facebook shares, however, dropped 3.5% in overnight trading after gaining nearly 1.50% during the regular session. The sharp decline in the company’s stock was caused by weak guidance and decreased growth projections.

Facebook said in its statement it expected “year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth.” Facebook stock this year has had a robust performance, gaining nearly $105 a share, or 39%, to yesterday’s closing price of $373.28.

During the earnings call with shareholders, Facebook CEO Mark Zuckerberg focused primarily on the company’s goal to create the “metaverse”, or as he described it “a virtual environment where you can be present with people in digital spaces.”

Indecision Characterizes the Stock Market

Mr. Zuckerberg announced the decision to launch the metaverse project just a few days ago. Facebook’s vision for a digital universe seeks to shifts people’s perspective on Facebook as a social media company. “In the coming years, I expect people will transition from seeing us primarily as a social-media company to seeing us as a metaverse company,” Facebook CEO said. “This is one of the most exciting projects that we’re going to get to work on in our lifetime,” he said during the call yesterday.

The broader stock market on Wednesday was largely undecided on a direction after the Federal Reserve decided to keep its current stance on monetary policy at least until their next meeting scheduled near the end of September. Fed Chair Jerome Powell held a press conference yesterday to conclude the two-day policy meeting between the 18 members of the Federal Open Market Committee.

As expected by investors, the US central bank left interest rates unchanged near zero while maintaining the current asset-purchase programme of $120bn per month in bond purchases. Fed Chairman Powell said that while the US economy is “ways away from having had substantial further progress toward the maximum employment goal”, the Fed signalled they could soon take the first step toward discussions over when to ease the monetary stimulus injected in the economy.

The Dow Jones Industrial Average on Wednesday slid moderately by 127.59 points, while the S&P500 kept steady near unchanged levels. The Nasdaq Composite pushed higher by 0.70% as the earnings season is now in the prime time of tech companies reporting their financial results for the second quarter of 2021.

In Europe, markets opened Thursday’s session trading moderately to the upside after major European bourses yesterday ended in the green. The pan-continental Stoxx 600 Europe on Wednesday gained 3.05 points, or 0.66%, to 461.70.

The crypto space today maintains the optimistic theme that buoyed major crypto assets during the past week. Bitcoin is painting a green candle in the early hours of the session, up by roughly 0.50% to $40,100.