Facebook misses expectations for cost control, revenue growth slowing

By Katie Paul and Munsif Vengattil (Reuters) - Facebook Inc said on Wednesday that growth would continue to slow as its business matured and it reported a surge in quarterly expenses, disappointing Wall Street expectations that the costs of improving privacy would level off. Shares of the world's biggest social network dropped 7.2% in extended trading. Total costs and expenses surged 34% to $12.22 billion (9.3 billion pounds) 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.

Reuters January 30, 2020 06:05:43 IST
Facebook misses expectations for cost control, revenue growth slowing

Facebook misses expectations for cost control revenue growth slowing

By Katie Paul and Munsif Vengattil

(Reuters) - Facebook Inc said on Wednesday that growth would continue to slow as its business matured and it reported a surge in quarterly expenses, disappointing Wall Street expectations that the costs of improving privacy would level off.

Shares of the world's biggest social network dropped 7.2% in extended trading.

Total costs and expenses surged 34% to $12.22 billion (9.3 billion pounds) 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.

The pace of expansion will slow further in the first quarter, with a percentage point decline in the low- to mid-single digits, Chief Financial Officer David Wehner said on a call with investors, citing maturing business, and the impact of global privacy regulation and concerns about ad targeting.

"We have experienced some modest impact from these headwinds to date. The majority of the impact lies in front of us," Wehner said.

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.

Still, its shares are up more than 50% over the last year, raising pressure for a strong performance.

"FB stock had made a big run-up in anticipation of the report ...so the room for error was low," said Daniel Morgan, a portfolio manager at Synovus Trust Co.

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.

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 Leslie Adler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.