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Facebook Climbs to 2.9 Billion Users, Reports $29.1 Billion in Q2 Sales

The social network’s stock drops 5% despite beating Wall Street’s earnings projections

Facebook on Wednesday reported better-than-expected Q2 sales and earnings, but the social network’s stock still took a hit after the company’s second quarter user growth slowed down slightly compared to previous quarters.

On the financial side, Facebook reported earnings of $3.61 per share — beating analyst projections by 60 cents — and revenue of $29.08 billion, compared to the $27.85 billion analysts were looking for. The company’s revenue increased 56% from the same time last year, which is the best quarterly sales growth Facebook has posted in five years.

Despite the strong sales growth, Facebook’s stock price dropped nearly 5% in early after-hours trading to $355.75. One potential reason could be the company’s user growth; Facebook hit 1.91 billion daily users by the end of Q2, which was up 7% year-over-year, but still represented a slight drop from the 8% annual growth the company reported last quarter. Facebook also closed the quarter with 2.9 billion monthly users, which was a hair below the 2.91 billion users analysts were looking for.

One interesting note on user growth: Facebook continues to struggle to add new users in the U.S. and Canada. For the second straight quarter, daily user growth in the U.S. and Canada was flat, with Facebook closing Q2 with 195 million daily users. Facebook has lost 3 million American users since the company reached a high of 198 million daily users in the U.S. and Canada at this point last year.

This is important when you consider how much Facebook makes off of its American users compared to its users abroad. Facebook’s average revenue per user in the U.S. and Canada was $53.01 — up 45% year-over-year — while its ARPU in Europe was $17.23 and its ARPU in Asia was $4.16.

Facebook’s DAU growth (via Facebook’s Q2 earnings slides)

“We had a strong quarter as we continue to help businesses grow and people stay connected,” CEO Mark Zuckerberg said in the company’s letter to shareholders.

Another point in Facebook’s Q2 report that may have startled investors: Facebook said it expects “increased ad targeting headwinds” 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.”

In late June, the Federal Trade Commission’s antitrust lawsuit against Facebook was dismissed. The FTC, along with 48 state attorneys general, had sued Facebook in December, claiming it not only has a social network monopoly, but that it has maintained that position primarily through its acquisitions of Instagram and WhatsApp. Facebook bought Instagram for $1 billion in 2012, and two years later, paid $19 billion for WhatsApp. (Both deals were approved by the FTC.) The FTC still has an opportunity to amend its lawsuit, but Wall Street took it as a good sign for Facebook, with the company’s stock price jumping 20 points in the last month.

Overall, Facebook’s stock has been on a strong run since the company last reported earnings in April. Facebook’s share price has jumped from about $322 in late April to $374 on Wednesday — a run that helped propel Facebook into a small group of tech giants with a market cap of $1 trillion or greater.

More recently, Facebook was criticized by President Joe Biden, who said the platform was was “killing people” by allowing bad COVID-19 information to circulate. Biden walked back his comments a few days later, but said he’d still like to see Facebook do more to combat vaccine misinformation.

“My hope is that Facebook, instead of taking it personally that somehow I’m saying Facebook is killing people, that they would do something about the misinformation,” President Biden said. “The outrageous misinformation about the vaccine. That’s what I meant.”

Zuckerberg pushed back lightly against the president’s framing, saying Facebook has been a source of “authoritative information” about the pandemic and shouldn’t be blamed for the spread of bad ideas.