Facebook reports record profit, stock surges 12% after earnings

See the original story, with comments from VP of Display & Social, Jesse Math, here in MarketWatch

After weeks of controversy, Facebook Inc. reported record profits — about $1 billion more than any previous quarter — as the company beat Wall Street expectations for fourth-quarter earnings and revenue late Wednesday, sending shares soaring.

Record profits, a growing user base and healthy top line suggest that Facebook’s base of advertisers is continuing to pour dollars into the social networking giant’s swath of apps and services that now attract 2.7 billion people a month around the world. The strong results cap weeks of negative news cycles that has evidently left Facebook relatively unscathed.

“Facebook has had so much bad news — even this week,” Forrester analyst Brigitte Majewski said over the phone, referring to another scandal that surfaced this week. “But you can’t deny the numbers. They’ve had an increase in daily active users, and growth in all regions.”

The Menlo Park, Calif.-based company reported $6.88 billion in net income for the fourth quarter, which amounts to $2.38 a share, up from $1.44 a share in the year-ago period. Analysts’ average estimates for fourth-quarter profits called for $2.18 a share, according to FactSet.

Overall, Facebook logged sales of $16.91 billion, up from $12.97 billion in the year-ago period, beating Wall Street expectations for sales of $16.39 billion, according to FactSet. Facebook’s main source of revenue is ads, which brought in 93% of revenue, up from 89% in the year-earlier period. Facebook’s payments and other fees category — which includes its Oculus virtual-reality hardware — banked $274 million compared with $193 million last year.

Facebook stock rose 11.5% in after-hours trading and were up roughly as much in premarket trade Thursday. Before Wednesday’s results, Facebook stock had fallen 19.6% in the past year, while the S&P 500 index declined 5%.

“Our community and business continue to grow,” Facebook Chief Executive Mark Zuckerberg said in a statement. “We’ve fundamentally changed how we run our company to focus on the biggest social issues, and we’re investing more to build new and inspiring ways for people to connect.”

After several quarters of declining or flat user growth in Canada and the U.S., Facebook said it added 1 million daily members in those territories. Daily membership grew in Europe as well, to 282 million from 277 million in the year-ago quarter.

Monthly active users in the U.S. and Canada remained flat at 242 million compared with the third quarter, though rose from 239 million in the year-ago period. Facebook said its European monthly users grew to 381 million from 370 million in last year’s fourth quarter.

Majewski said that while the user growth is interesting, she wants to know how Facebook’s user behavior is actually changing as a result of changes that the company has made to its various products. “I’ve been very curious about how [Facebook] will manage security improvements while investing in different ad formats,” she said. “They are such different things and at the end of the day, you have to wonder if those two things are going to knock heads.”

Executives on the conference call highlighted one of Facebook’s newer initiatives called Stories, saying that it has attracted 2 million advertisers and Instagram passed 500 million daily active users on Stories.

“Now, our advertisers are seeing very strong performance in Stories,” Jesse Math , vice president of display and social at ForwardPMX, said late Wednesday. “Facebook has developed creative optimization tools. What works for feed, with the click of a button, works in Stories.” Math said that Stories has moved from something of an underused part of Facebook’s ad platform to more of a competitive space.

The U.S. and Canada are Facebook’s most lucrative territories, and on average users were worth $34.86 each, compared with $26.76 in the same period last year; in Europe, Facebook made an average of $10.98 per user. Worldwide average revenue per user grew to $7.37.

“With these results, Facebook has clearly demonstrated that the challenges of 2018 have not had a lasting impact on its ability to increase both revenues and usage,” eMarketer analyst Debra Williamson said via email. “Advertisers are clearly still very reliant on Facebook, and the fact that daily active usage in both the U.S. [and] Canada and Europe increased is a surprise after the flatness we saw in the U.S. and Canada last year and the falloff we saw in Europe.”

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