Facebook Revenue Surges Nearly 50% -- 2nd Update
26 April 2018 - 8:18AM
Dow Jones News
By Deepa Seetharaman
Maybe everyone isn't so mad at Facebook Inc. after all.
In its first earnings report since the site began racing to
address privacy concerns and Chief Executive Mark Zuckerberg
squared off with angry lawmakers, Facebook posted rising revenue
and profit that highlighted the company's central place in the
digital economy.
The social-media giant has weathered one crisis after another in
the 17 months since the 2016 presidential election but its business
-- at least for now -- has remained healthy.
Facebook reported a quarterly per-share profit of $1.69, up from
$1.04 a year earlier, while revenue rose nearly 50% to $11.97
billion. Net income rose 63% to nearly $5 billion, compared with
$3.06 billion a year ago.
Analysts expected Facebook to report a per-share profit of $1.35
and quarterly revenue of $11.41 billion, according to data compiled
by Thomson Reuters.
Facebook added about 70 million monthly users during the first
three months of the year bringing its overall user base to 2.2
billion, up from 2.13 billion at the end of 2017.
The Menlo Park, Calif., firm also said it would buy back an
additional $9 billion in shares, adding to the $6 billion
previously authorized.
In after-hours trading Wednesday, Facebook shares rose about 7%
to $171.00.
Facebook's earnings report marks the first snapshot of how the
company's ties to political-data firm Cambridge Analytica are
affecting the Silicon Valley giant's business.
Cambridge Analytica aided the Trump campaign in 2016 and
allegedly bought data about tens of millions of Facebook users from
an outside developer. The incident, disclosed in mid-March,
highlighted Facebook's at times lax oversight of how outside
developers handled user data they extracted from the platform. It
also sparked widespread anger toward the site and a #deletefacebook
campaign. Cambridge Analytica has denied wrongdoing.
Much of the fallout from the incident happened after the quarter
ended in March and isn't fully reflected in Wednesday's report.
Still, the results underscore Facebook's continued ability to
generate cash during one of the toughest periods in the company's
14-year history.
Major advertisers "were very aware of the controversies swirling
and wanted to know more about what other brands were doing," said
Andy Taylor, associate director of research at data marketing firm
Merkle. "But really, in terms of making moves, advertisers are more
in a wait-and-see mode."
Mr. Taylor added that most advertisers generally remain happy
with Facebook's products.
Facebook's struggles haven't affected advertisers like last
year's controversy surrounding Alphabet Inc.'s YouTube and its
placement of ads adjacent to videos with objectionable content, Mr.
Taylor said.
"This situation isn't as controversial as [a brand's ad] popping
up against a racially charged video," he said. "In most cases,
that's very damning for a brand, whereas that same reaction hasn't
happened with Facebook."
Mr. Zuckerberg appeared twice in front of U.S. lawmakers this
month in hearings centered on the Cambridge Analytica episode, and
Facebook has redoubled efforts to stamp out abuse. Still, most
analysts and investors believe additional regulation is inevitable,
although it isn't clear what form it will take or what impact it
would have on Facebook's bottom line.
Mr. Zuckerberg told lawmakers this month that he was open to
some forms of regulation but added that too many rules could impede
American tech companies from competing head-to-head with Chinese
rivals.
The uproar over Cambridge Analytica is the latest episode to
spark widespread questions over Facebook's imprint on society. The
period since the 2016 presidential election has been tumultuous,
with users, advertisers and lawmakers questioning whether the
company sacrificed security and privacy in pursuit of relentless
growth.
Since reaching an all-time high in early February, Facebook
shares had fallen more than 18% before the earnings release.
Earlier this week, Facebook's biggest rival in the online-ad
space, Google parent Alphabet, reported a profit for the first
three months of the year that topped expectations, but investors
grappling with the company's higher expenses sent the shares down
4.8%, the stock's worst session in more than two months.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
April 25, 2018 18:03 ET (22:03 GMT)
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