Facebook Inc. today easily beat estimates for its second-quarter results, but a warning that growth would slow in coming quarters knocked its stock down in after-hours trading.

The company said it earned a net profit of $10.4 billion, or $3.61 a share, slightly more than double its profit a year ago, as revenue jumped 56%, to $29.1 billion — the fastest rate since 2016 and significantly higher than the first quarter’s 48%. Analysts on average had forecast a profit of $3.04 a share, up 68%, on revenue of $27.8 billion, up 49%.

But the news investors focused on was what’s coming, and they didn’t like what they heard. Facebook said in prepared comments that it expects year-over-year revenue growth to “decelerate significantly on a sequential basis” since it will lap 2020’s increasingly strong growth as the pandemic’s economic impacts eased.

Analysts polled by Refinitiv were forecasting third-quarter revenue of $28.22 billion, which would be a rise of only 31%.

Facebook also said it expects “increased ad targeting headwinds in 2021 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.” Like other big tech companies, Facebook has been under fire from regulators and legislators. On Tuesday, it took a small step toward easing some concerns with a new plan to restrict advertisers from targeting people under 18.

And it mentioned once again, as it has in previous quarters, that it’s monitoring developments concerning the “viability of transatlantic data transfers and their potential impact on our European operations.”

For his part, Chief Executive Mark Zuckerberg (pictured) in prepared comments focused even further out, on his pet vision of bringing the “metaverse to life.” That’s a reference to virtual worlds in which he believes people will increasingly spend more of their lives.

Shares of the social networking giant, whose valuation recently topped $1 trillion, fell about 4% in after-hours trading. They had risen 1.5%, to $373.28 a share, in regular trading today. Expectations were fairly high after Twitter and Snap, both of which also make virtually all their money on advertising, last week reported better-than-expected results. Google LLC parent Alphabet Inc. did the same Tuesday. Shares in all the companies rose as a result.

Facebook said its ad revenue in the quarter was driven by a 47% year-over-year rise in the average price per ad and a 6% increase in the number of ads delivered, trends it said would continue in the second half.

“Facebook saw a big boost to user growth during the early months of the pandemic in 2020, so it’s no surprise that its user growth rates this year are slower by comparison,” said Martin Garner, chief operating officer at CCS Insight. “But it still posted a strong set of earnings for the quarter, back in line with normal seasonal trends, and helped by general high demand for advertising.”

The company has been focusing more lately on spurring e-commerce in addition to its traditional brand focus, something that Chief Operating Officer Sheryl Sandberg called out. “Like Google, Facebook is putting huge focus on expanding its role in shopping, in order to play a greater role as consumers move from product discovery online through to a transaction,” said CCS Insights’ Garner.

“Facebook has been doubling down on building meaningful social commerce experiences — across shoppable posts, conversational commerce and live shopping experiences,” said Yuval Ben-Itzhak, president and chief of strategy at Emplifi Inc., a social media marketing firm. “Facebook is providing the perfect space for brands to experiment with social commerce and learn what works best for their audiences, by offering a range of e-commerce capabilities to try out. After years of focusing on the top of the marketing funnel — activities with reach and engagement metrics — Facebook is finally investing further into conversion opportunities with e-commerce.”

But he noted that Facebook faces more competition in “social commerce” from the likes of TikTok, Snap and even Twitter. “Customers tend to love the convenience of social commerce, which, in turn, is a major sales booster for brands,” he said. “However, it is yet to be seen whether some of the larger brands will accept Facebook owning their customers’ valuable data, like their purchase history and payment details, or whether that will be a step too far for brands and their customers.”

Zuckerberg spent time in the analyst conference call on how it’s reaching out to creators to use its platform, particularly for video, including short-form videos it calls Reels. “We want our platforms to be the best places for creators,” he said. “Video in particular is becoming the primary way people use our products and express themselves,” accounting for half the time people spend on its platforms.

Although ads make up the vast majority of Facebook’s revenue, $28.6 billion in the quarter, consumer hardware such as its Oculus virtual reality headsets saw revenue rise 36%, to 497 million, less than the $685.5 billion analysts expected.

Still, Zuckerberg views this as nothing less than the next computing platform. “Virtual reality will be a social platform,” he insisted. The CEO said augmented reality glasses it’s making with Ray-Ban will be the next step.

As for the metaverse, he said, “we believe this is going to be successor to the mobile internet.” He thinks this will lead to “entirely new experiences and economic opportunities,” adding, “In the long term there’s going to be a large digital economy around this.”

“The company has started to shift the discussion of its future from building economic activity around integrated messaging services (as Tencent has done in China with WeChat) to focusing more on building ‘the Metaverse,’ a collection of immersive online social experiences working across a range of devices, including its upcoming Ray-Ban augmented reality glasses,” said Garner. “Shifting the messaging back to a big long-term vision is a brave move at a time when so many people and companies are just getting back on their feet economically.”

Overall, Facebook said it had 3.51 billion users across its core app, Instagram, Messenger and WhatsApp, up from 3.45 billion in the first quarter. Daily active users were 1.91 billion, and monthly active users came in at 2.9 billion, both up 7% from last year, meeting analysts’ estimates.

Photo: Facebook