What happened

Shares of Facebook (NASDAQ:FB) fell sharply on Thursday following the social network's second-quarter earnings release. The tech company's stock fell as much as 19.6% and is down about 19% at 11:30 a.m. EDT. The decline cut more than $120 billion from Facebook's market capitalization.

The sell-off was likely prompted primarily by Facebook's worse-than-expected revenue and management's outlook for its operating margin to narrow in 2019.

Facebook CEO Mark Zuckerberg is standing on stage presenting a 10-year plan at the F8 conference in 2016.

Facebook CEO Mark Zuckerberg. Image source: Facebook.

So what

Facebook reported revenue of $13.2 billion, up 42% year over year. On average, analysts were expecting revenue closer to $13.4 billion. This year-over-year growth rate was 7 percentage points lower than the growth Facebook achieved in Q1.

Earnings per share increased 32% year over year to $1.74 -- a few cents above the consensus forecast for the quarter.

Facebook's 50% year-over-year jump in operating expenses meant its operating margin narrowed from 47% in the year-ago quarter to 44% in the second quarter of 2018.

Now what

"Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single digit percentages from prior quarters sequentially in both Q3 and Q4," said Facebook CFO David Wehner during the company's second-quarter earnings call.

In addition, Wehner said the company expects operating expense growth to exceed revenue growth in 2018 and 2019, with its operating margin falling "toward the mid-30s on a percentage basis" over the next several years.

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