Facebook shares fall as surging costs eat into profits

Facebook has been given the thumbs-down by Wall Street – despite better-than-expected user numbers – as costs surged and revenue growth slowed.
Shares fell 6% after it reported a 34% rise in costs and expenses to $12.2bn (£9.2bn) in the final quarter of 2019 compared with the same period a year earlier – eating into profit margins.

The social networking giant has been spending heavily to improve privacy and content across its apps in the face of intense regulatory scrutiny and growing competition for users’ screen time.
But analysts had been expecting to see this spending level fall in the latest quarter.
Facebook’s revenues grew by 25% to $20.7bn (£15.6bn), beating Wall Street estimates, but it was still the slowest-ever growth for the company.

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That underlined concerns that Facebook is struggling to maintain the kind of growth momentum it was enjoying until a few years ago.

Facebook said its number of daily active users had risen to 1.66 billion in December, up 9% on a year before.

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It also said that about 2.26 billion people were using at least one of its “family” of services – Facebook, WhatsApp, Instagram or Messenger – every day, up 11% on a year ago.
Profits for the quarter were 7% higher at $7.3bn (£5.5bn) though for the year they fell 16% to $18.5bn (£14bn), reflecting a $5bn fine levied on the company in July by US regulators over privacy violations.
Founder and chief executive Mark Zuckerberg said: “We had a good quarter and a strong end to the year as our community and business continue to grow.”
The California-based company faces intensifying scrutiny by regulators around the world, including investigations in the US for alleged anti-competitive behaviour.
Its fine by the US Federal Trade Commission last July came after allegations that it inappropriately shared the information of 87 million users with political consulting firm Cambridge Analytica.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “The Cambridge Analytica scandal intensified regulatory scrutiny, and tightening data security as well as fighting fake news is an ongoing – and expensive – challenge.
“That marks a change for Facebook’s comparatively low cost base, and combined with the investment in alternative products, operating margins are under strain.”

Source : Sky News