Facebook expects rising costs to combat scandals to moderate after 2019

Date:

Trending

Facebook Inc on Tuesday relieved investors by forecasting that margins would stop shrinking after 2019 as costs from scandals ease up, sending shares up despite a second-straight quarter with record-low user growth.

- Advertisement -

Chief Executive Mark Zuckerberg repeated the company’s warning that growing user interest in private messaging, video and safer content would cause costs to rise faster than revenue for “some time.” But he said he was focused on bringing them in line.

That same guidance three months ago sparked Facebook’s biggest one-day sell-off as some investors braced for dire results. The third-quarter performance and revised guidance suggested that the downward trend would be more gradual and taper off after 2019, financial analysts said.

- Advertisement -

Shares of Facebook traded up about 3 percent after updating its forecast. They reversed course several times, falling and gaining as much as 5 percent, during an hour of volatility after closing on Tuesday up 2.9 percent at $146.22.

Facebook, Amazon.com Inc and Google parent Alphabet Inc had suffered a battering over the last month on Wall Street after leading a years-long rally. Slowing growth has been a top concern, and Facebook’s weak results did not squash those fears.

“The best news was that the quarter was just not a disaster,” Ivan Feinseth, analyst at Tigress Financial Partners, told Reuters.

The company estimated revenue growth would slow in the current quarter, compared with last quarter, which could mark the worst performance since its initial public offering in 2012.

The main Facebook service and its Messenger sibling grew monthly users to 2.27 billion, up 10 percent compared with a year ago but a percentage point below both expectations and last quarter’s pace.

Zuckerberg said that Facebook’s problem is that users are gravitating towards features such as direct messaging and video viewing faster than it can find ways to place ads there while attracting clicks and not annoying users.

Adding to the challenge is that the bulk of new users are from countries including India, Indonesia and Philippines where advertisers focus more on TV, print and outdoor advertising, Facebook executives said.

Average revenue per U.S and Canadian user grew 6.7 percent in third quarter compared with the same period last year. Growth for Asian-Pacific users was 4.6 percent.

Though the factors are holding back ad prices, they also leave Facebook with significant untapped commercial opportunities with newer businesses such as WhatsApp. Still, Facebook said WhatsApp would not be a revenue driver in 2019.

A few financial analysts are concerned that the company’s operational problems are so vast that revenue growth and cost containment will not come as expected.

The company disclosed its latest gaffe on Tuesday, saying that its misclassification of user activity had led to immaterial overcounting of monthly and daily users.

More broadly, the social network’s reputation has suffered from a data breach affecting 29 million users in September and a privacy scandal involving a British political consulting firm in March.

It also has been rocked by domestic and international information warfare on its services, including WhatsApp and Instagram, and a wave of executive departures.

About 2.6 billion users interact with at least one of Facebook’s services each month, up from 2.5 billion when it released the figure for the first time last quarter to emphasise that its potential audience for advertisers is unrivalled in size.

Facebook’s spending has ballooned from licensing more engaging content such as video, and as it tries to fortify itself against fraudsters and hackers.

Zuckerberg said upcoming elections would be a test of its new systems, which he expects will be fully installed by end of 2019.

“With a community of more than 2 billion people, we will see all the good and bad that humanity can do. And we will never be perfect,” he said.

Total expenses in the third quarter surged to nearly $8 billion, up 53 percent compared with a year ago. Operating margin, which Facebook has said should fall around 35 percent, dropped 2 percentage points from last quarter, to 42 percent.

The company estimated 2018 expenses would rise 50 percent to 55 percent above last year, trimming an earlier range of up to 60 percent. It forecasts expenses will grow 40 percent to 50 percent in 2019.

Overall third-quarter revenue was $13.7 billion, up 33 percent from the same period last year and in line with expectations when accounting for currency fluctuations.

Quarterly profit of $5.1 billion, or $1.76 per share, was up 9 percent and above the average per-share estimate of $1.48.

Reporting by Munsif Vengattil in Bengaluru and Paresh Dave in San Francisco; Editing by Peter Henderson and Lisa Shumaker

THE SNAPSHOTS

Sign up to get quick snaps of everyday happening, directly in your inbox.

We don’t spam! Read our privacy policy for more info.

- Advertisement -

Support our independent journalism PayPal (Outside India) For PayU (For Indian Readers).

Krishna Mali
Krishna Mali
Founder & Group Editor of TechGraph.

More Latest Stories

More Articles

Iran May Exit Nuclear Treaty Under New Bill

Iranian parliamentarians are drafting a bill that could pave the way for the country to withdraw from the landmark Nuclear Non-Proliferation Treaty (NPT), a...

NSE India, Cyprus Stock Exchange Sign MoU for Dual Listings, Financial Innovation

India’s National Stock Exchange (NSE) and the Cyprus Stock Exchange signed a memorandum of understanding to support dual listings and joint financial research, aiming to strengthen ties between the two markets. The agreement, signed during Prime Minister Narendra Modi’s visit to Cyprus, seeks to increase...

Mark Zuckerberg Sells $21 Mn in Meta Shares, Files to Offload $9 Mn More

Meta Platforms (NASDAQ: META) CEO Mark Zuckerberg has filed to sell another $9.7 million...

Khair and Tunu Wood Seized in Major Operation by Jammu Forest Department

Acting on specific intelligence, the Forest Department team in Tehsil Bhalwal intercepted and seized...

Congo: Over 29 dead as floods, landslides hit Kinshasa

At least 29 people died in Kinshasa after heavy rains over the weekend triggered...

Sharp Bettors vs Recreational Bettors: What Sets Them Apart?

In the U.S. alone, over $120 billion was legally wagered on sports in 2023,...

Air India Plane Crash: Over 60 victims identified via DNA

Days after Air India’s Ahmedabad-to-London flight crashed with 242 passengers and crew on board,...

What You Need to Consider When Starting an HVAC Company

Entering the HVAC industry is a significant business decision that comes with both challenges...

36 Bangladeshi Nationals Held Without Visas in Delhi

The Delhi Police has apprehended 36 Bangladeshi nationals residing illegally in India. The dedicated team of the foreigners cell of the North-West District of...

Cybersecurity Theater: Why Companies Still Fall for the Illusion of Control

The world now experiences daily security breaches on evening news while ransomware groups operate...

India’s Tier 2 & 3 Cities: The New Battleground for Smart Delivery

India’s economic narrative is undergoing a profound transformation, shifting its gaze from the bustling...

Narcotics Bureau Seized ₹9.2 Crore Properties in Big Drug Lab Raid

The Narcotics Control Bureau (NCB) has attached properties worth ₹9.2 crore belonging to a...

ICG Transfers Distressed MV Wan Hai 503 to Tug Offshore Warrior in Kochi

In a key maritime operation, the Indian Coast Guard (ICG) successfully transferred the tow...

Civil Aviation Ministry: High-Level Panel to Probe Air India Flight Crash

The Ministry of Civil Aviation has constituted a high-level multi-disciplinary committee to investigate the circumstances surrounding the plane crash of Air India Flight AI-171...

ISRO Schedules June 19 for Ax-4 Mission Launch Carrying Indian Astronaut to ISS

The Indian Space Research Organisation (ISRO) on Saturday announced that the Ax-4 mission to the International Space Station (ISS), carrying Indian astronaut Group Captain Shubhanshu Shukla, is now scheduled for launch on June 19, 2025. The mission had been deferred following the detection of a...

India Distances Itself from SCO Stance on Israel’s Attack On Iran, Calls for Dialogue

India has opted out of a recent Shanghai Cooperation Organisation (SCO) statement that strongly...

Los Angeles Protests: President Trump Deploys 700 Marines, 200 to Secure Federal Building

As nationwide protests against the Trump administration are expected to unfold across the U.S....

Typhoon Wutip Hits Hainan China

Typhoon Wutip, the first named storm of the 2025 Pacific typhoon season, lashed China’s...

Meta’s Chief Legal Officer Offloads $363,219 in Shares Under Pre-Arranged Plan

Meta Platforms Inc.’s Chief Legal Officer Jennifer Newstead sold 519 shares of the company’s...

Alphabet Shareholders Reject All 13 Proposals, Re-elect Entire Board

Alphabet Inc. (NASDAQ: GOOGL) shareholders rejected all 13 investor proposals at the company’s annual...

BGC Director Arthur Mbanefo Sells Shares Worth Over $295k Amid Company Buyback

Arthur U. Mbanefo, a board member at BGC Group Inc., sold a total of...

Nvidia Director Tench Coxe to Sell Shares Worth $142.7 Million

Nvidia Corporation board member Tench Coxe has filed a notice with the U.S. Securities...

From Diagnostics to AI: The New Age of Car Repair Technology

The automotive industry is undergoing a significant transformation, driven by technological advancements that are...

TikTok Star Khaby Lame Detained by ICE in Las Vegas

Social media sensation Khaby Lame, the world’s most-followed TikTok creator with over 162 million...

Narcotics Bureau Seized ₹9.2 Crore Properties in Big Drug Lab Raid

The Narcotics Control Bureau (NCB) has attached properties worth ₹9.2 crore belonging to a...

Manipur: Security Forces Seize 328 Guns, 9,300 Rounds in Joint Raids

In a major crackdown, security forces recovered a large cache of arms and ammunition...

Israel-Iran War: IAEA Confirms Damage at Iran’s Natanz Plant

The International Atomic Energy Agency’s Director General Rafael Grossi has confirmed the destruction of...

Ahmedabad Plane Crash: DGCA Orders Air India To Conduct Extra Security Checks on Boeing 787s

Directorate General of Civil Aviation has directed Air India to carry out additional safety...

Bangladesh Election Expected to be Held in Feb 2026

Bangladesh’s next general election is expected to be held in the second week of...

ICG Transfers Distressed MV Wan Hai 503 to Tug Offshore Warrior in Kochi

In a key maritime operation, the Indian Coast Guard (ICG) successfully transferred the tow...

From Diagnostics to AI: The New Age of Car Repair Technology

The automotive industry is undergoing a significant transformation, driven by technological advancements that are...

India, Mongolia Holds Joint Military Drills in Ulaanbaatar

The 17th edition of the joint military exercise Nomadic Elephant 2025 between India and...

TikTok Star Khaby Lame Detained by ICE in Las Vegas

Social media sensation Khaby Lame, the world’s most-followed TikTok creator with over 162 million...