Facebook down after modest results

Facebook's first earnings report as a public company had solid numbers, but in the end it landed with a thud - much like its rocky initial public offering two months ago.

Facebook reported stronger-than-expected revenue and a gain in user numbers but investors were not impressed and after a brief spike, its stock tumbled nearly 9%, or 2.38 US dollars, to 24.47 dollars in after-hours trading. It had closed down 8.5%, or 2.50 dollars, at 26.84 dollars.

Even so, Facebook said revenue grew 32% to 1.18 billion dollars (£752 million) from 895 million dollars (£570 million) a year ago.

Adjusted earnings of 295 million dollars (£188 million), or 12 cents per share, matched Wall Street's expectations. Analysts on average had expected slightly lower revenue of 1.16 billion dollars (£739 million), according to FactSet.

Facebook said it had 955 million active monthly users as of June 30, up 29% from a year earlier.

Overall the California-based company posted a loss of 157 million dollars (£100 million), or 8 cents per share, in the April-June period, mainly due to compensation expenses it incurred when it gave employees 1.3 billion dollars (£829 million) in restricted stock and related taxes as part of the IPO.

The loss compared with earnings of 240 million dollars (£153 million), or 11 cents per share, in the second quarter a year ago.

The results come two months after Facebook's stock flopped on its first trading day, on May 18. The day began with glitches with the Nasdaq stock market that delayed trading by half an hour. It did not get much better from there. Despite months of hoopla that had investors thinking it would soar, the stock closed just 23 cents above its 38 dollar IPO price. It has not reached that level since.

Though Facebook had a lot riding on its first public report, Wall Street's outlook was muted, which could be a reason for the stock's decline. Investors were probably holding out hope that Facebook would far exceed expectations - even though the company effectively warned investors before its IPO that Wall Street's expectations were too high.

Overall, Facebook said its revenue from advertising totalled 992 million dollars (£632 million), a 28% increase from the same quarter last year. That number accounted for 84% of total revenue. The company did not say what portion was from mobile advertising. The company did not provide an outlook in its earnings press release - another possible reason for investors' disappointment.