Facebook saw its fastest growth this quarter since 2016, the company revealed in its earnings report on Wednesday, despite regulatory concerns and criticisms surrounding misinformation on the platform.
The social media company’s overall revenue hit $29bn, above forecasts of $27.89bn, and its profits doubled from a year earlier to $10.39bn thanks to a boom in online advertising. However, it warned of a potential slowdown in the second half of the year.
Shares slid back nearly 4% in after-hours trading following warnings from chief financial officer David Wehner that the company expects year-over-year revenue growth to slow “significantly” as an uptick in digital ad sales related to Covid-19 recovery slows back down. He said the company expects growth to slow “modestly” in the second half of the year.
Still, Facebook’s growth in 2021 has remained strong despite potential regulatory headwinds, including aggressive criticism from the Biden administration in recent weeks. Its daily active users in quarter two rose to nearly 2.9bn from 2.7bn users this time last year.
The report released Wednesday indicates “another blockbuster quarter” for the tech giant, said Jesse Cohen, senior analyst at Investing.com.
“The impressive report further highlights our view that Facebook continues to lead the industry in all of the categories they compete in and are executing flawlessly on all front,” Cohen said.
Facebook’s strong performance follows record-setting financial reports in recent days from Apple, Microsoft, Tesla and Google parent Alphabet. Amazon reports its results on Thursday.
The report comes after Facebook announced a renewed commitment to a “metaverse” project – which involves using artificial reality and virtual reality to allow users to inhabit digital worlds together. It has also recently announced it will pay $1bn to creators over the next year in an effort to foster more original content on the platform.
Zuckerberg stressed the potential of the company’s metaverse project in a call with investors, saying it is going to “create a lot of value for many companies” but will require “a very significant investment over many years”.
“This is one of the most exciting projects that we are going to get to work on in our lifetimes,” Zuckerberg said. “I expect people will transition from seeing us primarily as a social media company to primarily as a metaverse company.”
The company also cited the rise of video content for its growth this quarter, saying video now accounts for almost half of all time spent on Facebook. Its short video TikTok copycat feature Reels was also the largest contributor to engagement growth on Instagram.
The company has mounting regulatory hurdles to address. In recent weeks, Joe Biden condemned Facebook and other tech companies for failing to take action against vaccine misinformation and Democratic senator Amy Klobuchar introduced a bill targeting the issue that could spell legal trouble for Facebook.
Facebook also faces imminent threats from the Federal Trade Commission, whose new chair, Lina Khan, has been a vocal critic of the platform in the past and has pledged to take action against tech monopolies.
“Growing regulatory concerns and mounting antitrust scrutiny will be major headwinds for Facebook in the months ahead as the Biden administration has made it clear it wants to rein in big tech,” Cohen said.
