Facebook hit by user drop as European growth falls for a second quarter

Social media giant Facebook failed to live up to estimates for monthly user growth in its third quarter, as growth remained flat in North America but fell across Europe for the second consecutive quarter in the wake of massive data breaches and tightened regulations.

Despite this, its profits outperformed expectations, the firm said tonight.

Shares initially dropped over five per cent in anticipation after the bell, but then rose over three per cent in after-hours trading above the closing price. Earlier in the day, the stock had climbed more than two per cent.

In the three months to 30 September, Facebook’s global monthly active users, which includes data for Whatsapp, Instagram and Messenger, were 2.27bn. This fell short of the 2.29bn put forward by consensus estimates as collated by Refinitiv.

Facebook’s net income for the quarter rose to $5.1bn (£4bn) or $1.76 per share, beating average forecasts of $1.48 per share.

However revenue growth was at its slowest for six years, rising 33 per cent year-on-year to $13.7bn and slightly missing analyst estimates.

Operating costs, which were Facebook’s biggest stinger last quarter, grew even higher to rise 53 per cent year-on-year as the firm battled with the aftermath of several data scandals.

Facebook has been spending heavily on increasing its security and content monitoring teams, while also allowing users to limit the amount of advertising they see.

Hargreaves Lansdown equity analyst George Salmon said: "In the early days, Mark Zuckerberg used to implore his staff to move fast and break things. Today, Facebook is more about moving fast to fix things."

Executives had already warned shareholders of its anticipated growth deceleration at the company’s last earnings call in July.

The news comes as Facebook’s UK policy head told a Lords committee yesterday that once a consultation begins for chancellor Philip Hammond’s digital services tax, the firm will be “fully engaging with that process when we see it”.

The proposal seeks to impose a two per cent tax on revenue attributable to the UK on large tech firms such as Facebook, commencing in April 2020.