Facebook Profit Tops $1 Billion

Facebook Inc. Wednesday posted more than $1 billion in quarterly net income for the first time, reflecting the social network's ability to quickly capitalize on its popularity.

Fourth-quarter revenue rose 52%, to $5.84 billion, up from $3.85 billion in the same period a year earlier, as the social network drummed up more interest from advertisers. Costs, meanwhile, rose 21%.

Shares of the company jumped 4.3% to $98.35 in after-hours trading.

Last year marked a big investment period for Facebook, which hired thousands more people and poured money into projects including its virtual-reality arm Oculus VR, artificial intelligence and extending Internet access to remote areas. The company pulled back spending in the second half of the year.

At the same time, Facebook expanded advertising options, such as allowing marketers to place more ads on its photo-sharing app Instagram. In many cases, the company has also been able to command higher prices for those ads, especially in North America, analysts and advertisers say. Bernstein Research analyst Carlos Kirjner estimates that prices for ads in Facebook's main news feed in North America rose as much as 20% last year.

Surging revenue and profit boosted Facebook shares nearly 30% last year, briefly vaulting the 12-year-old company's market capitalization above $300 billion before the recent market pullback.

For the fourth quarter, Facebook reported net income of $1.56 billion, or 54 cents per share, up from $701 million, or 25 cents a share reported a year ago.

Excluding some expenses, Facebook reported earnings of 79 cents per share, higher than the 68 cents a share projected by Wall Street analysts.

Analysts expect Facebook to further temper its spending in 2016. Mr. Kirjner predicted a 32% jump in spending and a 39% rise in revenue in the coming year.

About 1.59 billion people accessed Facebook at least once a month in the fourth quarter, up from 1.55 billion three months earlier.

Analysts point out that the company still has many untapped revenue drivers at its disposal, including messaging and virtual reality. Earlier this month, Facebook's WhatsApp messaging unit said it would scrap its subscription fee and test ways to help businesses to interact with users. Facebook Messenger added a similar feature in 2015. Oculus VR plans to start shipping its $599 Rift virtual-reality headset in March.

Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com

(END) Dow Jones Newswires

January 27, 2016 16:35 ET (21:35 GMT)

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