Facebook misses expectations for cost control, shares tumble

(Reuters) – Facebook Inc (FB.O) reported a decline in fourth-quarter operating margins on Wednesday, missing Wall Street’s expectations that it would level off spending to improve privacy and content across its apps, and revenue growth was the slowest ever.

FILE PHOTO: A woman looks at the Facebook logo on a screen, June 3, 2018. REUTERS/Regis Duvignau/File Photo

Shares of the world’s biggest social network dropped 6.3% in extended trading.

Total costs and expenses surged 34% to $12.22 billion in the fourth quarter, more than double the 14% that analysts had forecast and dragging down operating margins to 42% from 46% a year earlier.

Revenue growth was the slowest-ever at 25%, although it beat analysts’ expectations of a dip to 23%, playing to concerns that Facebook is struggling to restore its pre-2018 momentum.

“Facebook’s revenue was up 25%, which is incredibly the slowest year-on-year growth rate in its history. That makes it the fourth straight quarter that the social media giant has delivered sub-30% growth,” said Jesse Cohen, analyst at financial markets platform Investing.com.

Facebook has faced scrutiny over the past three years from regulators and users worldwide over its privacy practices and data breaches. It is also facing heat over how its services have been manipulated and used to spread misinformation.

Daily active users rose to 1.66 billion in the fourth quarter, ahead of estimates of 1.65 billion, according to IBES data from Refinitiv.

Ad sales jumped 25% to $20.74 billion in the quarter, above analysts’ average estimate of $20.52 billion, according to IBES data from Refinitiv.

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Net income rose to $7.35 billion, or $2.56 per share, in the three months ended Dec. 31, from $6.88 billion, or $2.38 per share, a year earlier. Analysts had expected a profit $2.52 per share, according to IBES data from Refinitiv.

Total revenue rose 24.6% to $21.08 billion, beating estimates of $20.89 billion.

Reporting by Munsif Vengattil in Bengaluru and Katie Paul in San Francisco; Editing by Sriraj Kalluvila and Leslie Adler



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