Facebook Inc on Wednesday blew past Wall Street profit estimates in the first quarter and set aside US$3 billion to cover a settlement with US regulators, calming investors who had worried about the outcome of a months-long federal probe.
Shares of the world’s biggest online social network jumped more than 10 percent to US$200.50 in after-hours trade. They have now regained much of the ground lost last year amid slowing growth and costs associated with the company’s privacy scandals.
The settlement accrual, which Facebook set at US$3 billion, but said could rise as high as US$5 billion, cut the company’s net income in the first quarter to US$2.43 billion, or US$0.85 per share.
Excluding the charge, Facebook would have earned US$1.89 per share, up from US$1.69 in the same quarter last year and easily beating analysts’ average estimate of US$1.63 per share, according to IBES data from Refinitiv.
Total first-quarter revenue rose 26 percent to US$15.1 billion from US $12.0 billion a year earlier, again beating analysts’ average estimate of US$15.0 billion.
“This is a strong report suggesting that advertisers still see value in Facebook’s platform as they did before the controversies and scandals erupted,” said Haris Anwar, senior analyst at financial markets platform Investing.com.
Monthly and daily users of the main Facebook app were both up 8 percent compared with last year, to 2.4 billion and 1.6 billion respectively, in line with forecasts.
Total expenses in the first quarter were US$11.8 billion, including the settlement accrual, up 80 percent compared with a year earlier as the company hired content moderators and invested in new security controls to make its social networks safer.
Executives said in a conference call with investors that they expected expenses to grow 47 to 55 percent this year, updating their earlier forecast of an increase of 40 to 50 percent.
The first-quarter operating margin fell to 22 percent from 46 percent a year earlier, but would have been a comfortable 42 percent without the one-time expense.
The number of Facebook users barely budged in the US, Canada and Europe, indicating saturation in the company’s most lucrative markets.
Its largest and fastest-growing user base is now in Asia, where monthly active users jumped 12.4 percent from last year. The region represents nearly half of all Facebook users, but brought in less than one-fifth of the company’s revenue.
That shift in geography, along with slow advertiser adoption of new services like Stories, resulted in a 4 percent decline in the average price per ad in the first quarter.
Facebook plans to shift focus toward private communications, integrating its messaging services across Facebook, Instagram and WhatsApp, but has not articulated how it would adapt its advertising-driven business model.
Facebook also faces the prospect of action by lawmakers, with some calling for federal privacy regulation and anti-trust action to break up big tech companies.
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