It is the season of earnings reports coming in from the top tech companies in the US. While we saw Apple smashing some records yesterday, it is Facebook today which has come out with its earnings report. And the numbers continue to look exciting.
The social media giant has reported that its revenue in the last three months of 2019 rose 25 percent from a year earlier to $21 billion. However, the company’s profit increased by only 7 percent year-on-year to $7.3 billion, compared to 61% growth over 2018. Meanwhile, operating margins fell from 45% over 2018 to 34% for 2019. Revenue growth too was down from 28 percent in the previous quarter.
All of these slowing numbers resulted in the company’s share price loosing steam. The price fell by well over 7% in after-hours trading after being in the green for much of the days preceding its earnings announcements.
Facebook’s expenses rose to more than $12 billion in the fourth quarter, which is up 34 percent from a year earlier. The company has also agreed to pay $550 million for settling a class-action lawsuit related to biometric data collection. In terms of users, Facebook reached 2.5 billion monthly users, up 2%, from 2.45 billion in Q3 2019 when it grew 1.65%, and it now has 1.66 billion daily active users, up 2.4% from 1.62 billion last quarter when it grew 2%.
What is impressive though, is the fact that Facebook managed to increase its profits even as it increased its spending on paying fines, security, research and development, and other areas of the business. The company has considered $5B FTC payout in these earnings, thus reflecting lower profits. Even with the slow growth, Facebook has managed to get more marketing dollars from millions of advertisers relying on its service. This comes despite the company being the center of massive regulatory concerns and competitive pressure.
However, 2019 has turned into a year when the company has not reported sales growth above 30 percent in any quarter. As the social media platform has now matured into a larger organization, the company’s shareholders who are accustomed to Facebook’s rapid-growth, doesn’t seem to be happy with the results and sent its stock down more than 7 percent in after-hours trading.
Now, Facebook founder and CEO Mark Zuckerberg will focus on securing the platform in the run-up to the November election. It should now aim to stop the spread of misinformation as well as foreign interference. Election security teams have ballooned at Facebook, which is resulting in spends of billions of dollars on the effort.
