Facebook's income falls short
Facebook's income falls short
it recorded lower third-quarter revenue than expected and warned that it is in the early stages of a transformation in its core businesses, which will lead to slower growth and higher costs in the short term.
The results, in conjunction with the company's guidance, were well received by investors, many of whom feared even worse after the company's earnings report in July led to A historical collapse in the price of the shares..
Chief Executive Mark Zuckerberg said that Facebook's main service has so far made an unstable transition from news format to increasingly popular but less lucrative products like Stories, which allows users to share montages of photos and videos that disappear after 24 hours.
The change "has not been as smooth as I expected," Zuckerberg said Tuesday, although he said the Facebook Stories format is "growing rapidly and I think we'll be in a better position soon." He also said that video ads earn "significantly less" per minute than those shown in the news.
Mr. Zuckerberg added that he believes the company is at least a year away from updating its internal systems to the point where it can prevent misinformation and abuse "at the level we want."
"I hope 2019 is another year of significant investment" throughout the company, he said.
As investors digested the profits and guidance of Facebook officials, the stock price declined in post-closing operations. He plunged sharply during Mr. Zuckerberg's comments and then bounced higher as quickly. It rose more than 4% when Facebook ended its call with analysts on Tuesday night.
In total, it was a more positive reaction from investors compared to the previous quarter. When the company warned in July of a slowdown in the growth of its second quarter earnings, Facebook shares suffered the biggest loss of a day for a company that is quoted in the United States, with almost $ 120 billion chopped up of its market value.
SunTrust analyst Robinson Humphrey Youssef Squali said he was "relieved" by Tuesday's report.
"A year ago, when everything was going well, we assumed that everything was going to be good for a prolonged period of time," said Mr. Squali, who has a "buy" rating on Facebook shares. "Now we have adapted a little, we have the fear of God in us."
For the third quarter, Facebook reported earnings per share of $ 1.76, up from $ 1.59 the previous year and exceeded analyst projections of $ 1.46, according to data compiled by FactSet. The net income of Facebook increased to $ 5.13 billion from $ 4.71 billion. The 9% increase in earnings was the slowest growth rate in quarterly earnings since the second quarter of 2015, according to FactSet.
Revenues increased 33% to $ 13.73 billion, falling slightly below expectations of $ 13.77 billion. The percentage increase was the lowest in six years, FactSet said.
Prior to Tuesday's earnings report, Facebook shares had fallen about 20% so far this year and about 34% since its earnings report at the end of July. The decrease in the price of the shares is part of a larger pattern of investors fleeing giant technology companies such as Google's parent company.
Alphabet
Inc.
Y
Amazon.com
Inc.,
which posted disappointing sales growth last week.
Around 1.5 billion people use Facebook every day and 2.3 billion use it monthly. Those figures were in line with expectations.
The biggest sources of growth for Facebook users are in developing markets, especially in Asia, where it generates around $ 2.67 per user. The user base of Facebook did not grow much in its most lucrative markets, which are the USA. UU., Canada and Europe. Facebook earns $ 27.61 for each user it has in the United States and Canada and $ 8.82 for its user base in Europe.
This year has marked perhaps the most difficult period in the almost 15 years of Facebook's history. Critics have attacked the company's lax data privacy practices, following Facebook's disclosure that it provided user records to a third party, which then He sold the information to the political analysis firm. Cambridge Analytica.
Facebook has also been criticized for not enforcing its content policies and allowing erroneous information to infect its various applications.
Facebook is preparing for slower growth in its advertising business, which collects most of its revenue from the ads that appear on Facebook news. But users are now adopting different features such as stories, videos and private messages, and that will probably replace part of the time they currently spend on news.
Finance Director Dave Wehner said that the growth of Facebook's advertising impression would come from products and areas where Facebook does not make that much money, but it will have to spend a lot to remain competitive.
When it comes to a video, Mr. Zuckerberg said that Facebook was seeing an increasing use of its video-centric products such as Facebook Watch and IGTV, but remained "far behind" the YouTube of Alphabet, which he called Facebook's main rival in video. Facebook also faces tough competition in messaging from
Apple
Inc.,
that iMessage offers on all their devices, said Zuckerberg.
The executive suggested that Apple has an advantage over Facebook by combining iMessage with iPhones, especially in the US. UU
"In countries where there is more competition between iOS and Android than in much of Europe, people tend to prefer our services," such as WhatsApp and Messenger, said Mr. Zuckerberg.
Write to Deepa Seetharaman in Deepa.Seetharaman@wsj.com
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