Facebook’s share price fell more than 20% in after-hours trading yesterday. Why? The company announced revenues and daily active user numbers that fell short of analyst estimates ($13.04 billion vs. $13.32 billion for the quarter, and 1.47 billion rather than 1.48 billion) and, more worryingly for investors, it warned that its increasing privacy efforts would hit its growth rate further in the second half of this year.

Indeed, user numbers in North America are flat and those in Europe have actually fallen. So the expectation that Facebook was just going to shrug off Europe’s hard-hitting new General Data Protection Regulation (GDPR,) as well as the privacy scandals that have plagued it through much of the year so far, was way off the mark. These things are making a difference, and they will continue to do so.

Here’s what CFO David Wehner said on the fateful earnings call: revenue growth will probably “decline by high single-digit percentages from prior quarters” and “we are also giving people who use our services more choices around data privacy which may have an impact on our revenue growth.” Wehner also noted that Facebook is trying more to promote its users’ personal Stories timelines, which currently bring in less money—this is as opposed to users’ Newsfeeds, which is where all those problematic fake news issues fester.

So, is this bad? I think journalist-turned-investor Kim-Mai Cutler hit the nail on the head when she noted on Twitter that “the last three to six months have been reporters screaming about [Facebook] to take more civil, public accountability (which I support). So maybe the headline should be that it’s OK [for Facebook to take] a $142B hit to resolve really serious, long-term structural issues.”

The fact is that the changes wrought by the GDPR and the Cambridge Analytica affair were long overdue. Facebook has been able to achieve its mammoth scale largely through its free exploitation of people’s data, and those people are now both wise to the implications and—in Europe and soon California—able to do something about it.

Facebook and other big tech platforms have to seriously address data protection if they are to maintain or regain users’ trust, which is essential for engagement and long-term growth, and stay on the right side of the law while they’re at it. That means taking this hit while they adjust, even if it makes it harder to provide pinpoint targeting for advertisers. No pain, no gain.

But there is one particular long-term issue they need to figure out, and fast. These companies train their algorithms on the “big data” coming from their users. Now that some users get to pull their data out of that mix or limit how it is used, it’s important to ensure that the algorithms stay useful for everyone, and not only the subset of users who exert no control over their data via their newfound privacy options. The future of these companies’ nascent AI efforts depends on making them relevant to all users, no matter where they choose to place themselves on privacy’s sliding scale.

More news below.

Top News

Trump and Juncker

Yesterday's talks between Presidents Donald Trump and Jean-Claude Juncker appear to have gone well, with the escalation of the U.S.-EU trade war on hold for now. Under the light-on-details deal, the U.S. won't levy new tariffs on European cars, and the EU will buy more American soybeans (which it was going to do anyway) and liquefied natural gas (which suits those Europeans who are annoyed at Germany for its Nord Stream 2 deal with Russia.) Trump's tactic of setting low expectations for the meeting seems to have paid off. Fortune

Auto Stocks Surge

Who knew? Turns out carmakers' investors like the idea of no new tariffs. BMW is up 3.1% at the time of writing on Thursday morning, Volkswagen's up 3.3%, Fiat Chrysler's up 4.2%, Daimler's up 2.4%, and Peugeot is up 2.7%. Bloomberg

Qualcomm and NXP

Over to the U.S.-China trade war, then. Qualcomm has walked away from its proposed takeover of Dutch chipmaker NXP because of silence from Chinese regulators who needed to approve the deal. It seems Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross failed in their last-minute attempt to convince the Chinese not to lump the Qualcomm deal in with the wider Sino-American trade spat. Wall Street Journal

Shell Buys Shell Shares

Shell's latest quarterly results fell short of analyst estimates, despite involving a 30% boost in net profits. The company, which has also now announced a $25 billion share buyback program, saw its share price fall 2.3% in Thursday trading (at the time of writing.) CNBC

Around the Water Cooler

Sky High

As the bidding war between Comcast and Disney for European broadcast giant Sky simmers, Sky has announced a 7.5% boost in pre-tax profits, plus the addition of 500,000 customers over the last year. Comcast is currently in the lead, but Fox—which wants to buy the 61% of Sky that it doesn't own, then sell Sky and other assets to Disney—is also still in the running. BBC

Beijing Blast

A man has been arrested after apparently detonating an explosive device—either a bomb or a firework—outside the U.S. embassy in Beijing. No one was reportedly injured apart from the man, who comes from Inner Mongolia and who hurt his hand in the incident. South China Morning Post

CNN Ban

The White House banned CNN reporter Kaitlan Collins from a press event after she asked President Trump questions about Michael Cohen, his former lawyer, and Russian President Vladimir Putin. Collins was serving as a pool reporter for several news organizations at a press conference following Trump's meeting with European Commission President Jean-Claude Juncker, when she asked questions deemed "inappropriate" by White House media relations. Fox News, Trump's preferred outlet, issued a statement of solidarity with CNN after the incident. NBC

Sinclair-Tribune Merger

President Trump took to Twitter yesterday to lash out at the Federal Communications Commission (FCC) for its rejection of Sinclair Broadcast Group's takeover of Tribune Media Company. "Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!" he thundered. The FCC unanimously decided last week to refer the deal to an administrative law judge, over concerns about Sinclair controlling too many stations. That effectively amounts to nixing the merger. Ars Technica

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.