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Home > News > World News > Article > Facebook posts strong 3Q profit lukewarm revenue

Facebook posts strong 3Q profit, lukewarm revenue

Updated on: 31 October,2018 07:57 AM IST  |  New York
AP |

Coming three months after its stock suffered its worst one-day drop in history, wiping out USD 119 billion of its market value, the mixed results were perhaps not the redemption Facebook hoped for

Facebook posts strong 3Q profit, lukewarm revenue

Facebook

Facebook didn't hit it out of the ballpark with its latest quarterly report, but the bar isn't so high these days for the image-battered social networking giant. The company reported a slight revenue miss but stronger than expected profit for the July-September period. Coming three months after its stock suffered its worst one-day drop in history, wiping out USD 119 billion of its market value, the mixed results were perhaps not the redemption Facebook hoped for.


But shares inched a bit higher after-hours, suggesting, at least, that the social media giant didn't further spook investors. With the myriad problems Facebook is facing, that's what passes for good news these days. "Overall, given all the challenges Facebook has faced this year, this is a decent earnings report," said eMarketer analyst Debra Aho Williamson. Facebook had 2.27 billion monthly users at the end of the quarter, below the 2.29 billion analysts were expecting. Facebook says it changed the way it calculates users, which reduced the total slightly. The company's user base was still up 10 per cent from 2.07 billion monthly users a year ago.


The company earned USD 5.14 billion, or USD 1.76 per share, up 9 per cent from USD 4.71 billion, or USD 1.59 per share, a year earlier. Revenue was USD 13.73 billion, an increase of 33 per cent, for the July-September period. Analysts had expected earnings of USD 1.46 per share on revenue of USD 13.77 billion, according to FactSet. The company warned last quarter that its revenue growth will slow down significantly for at least the rest of this year and that expenses will continue to balloon. The following day the stock plunged 19 per cent.


It was the biggest one-day plunge in history, and the shares not only haven't recovered, they've since fallen further amid a broader decline in tech stocks . Facebook's investors, users, employees and executives have been grappling not just with questions over how much money the company makes and how many people use it, but its effects on users' mental health and worries over what it's doing to political discourse and elections around the world. Is Facebook killing us?

Is it killing democracy? The problems have been relentless for the past two years. Facebook can hardly crawl its way out of one before another comes up. It began with "fake news" and its effects on the 2016 presidential election (a notion CEO Mark Zuckerberg initially dismissed) and continued with claims of bias among conservatives that still haven't relented. Then there's hate speech, hacks and a massive privacy scandal in which Facebook exposed the data of up to 87 million users to a data mining firm, along with resulting moves toward government regulation of social media. Amid all this, there have been sophisticated attempts from Russia and Iran to interfere with elections and stir up political discord in the U.S.

All this would be more than enough to deal with. But the business challenges are also piling up. There are stricter privacy regulations in Europe that can impede how much data it collects on users. Facebook and other tech companies face a new "digital tax" in the UK. It is spending heavily to boost security, moderating content and investing in new technologies such as artificial intelligence. On Tuesday, Arjuna Capital and the New York State Common Retirement Fund filed a shareholder proposal asking Facebook to publish a report on its policies for governing what is posted on its platform and explain what it is doing to "address content that threatens democracy, human rights, and freedom of expression."

"Young users are deleting the app and all users are taking breaks from Facebook," said Natasha Lamb, managing partner at Arjuna Capital. "When you start to see users turn away from the platform, that's when investors get concerned." A recent Pew Research Center survey found that more than a quarter of US Facebook users have deleted the app from their phones and 42 per cent have taken a break for at least a few weeks. Younger users were much more likely to delete the app than their older counterparts. Nonetheless, Facebook is still enjoying healthy user growth outside the US Facebook's stock climbed USD 2.68, or 1.8 per cent, to USD 148.90 in after-hours trading.

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