Facebook Posts Strong Earnings, Revenue Growth -- 2nd Update
July 24 2019 - 5:27PM
Dow Jones News
By Jeff Horwitz
Facebook Inc. pushed past a record-setting privacy fine in the
second quarter, posting strong earnings that show the resilience of
its social-media empire despite persistent negative headlines.
The tech giant recorded $16.9 billion in revenue, up 28% from a
year ago. The company posted $2.6 billion in profit, or $0.91 a
share, reflecting a one-time $2 billion charge as part of its $5
billion settlement with the Federal Trade Commission and an
accounting change regarding tax deductions for stock-based
compensation. Without those two charges, the company would have
earned $1.99 a share, beating analysts' expectations of $1.88.
Facebook's results show the duality defining the company at the
moment: It is a punching bag for critics, who pummel it for
repeated privacy missteps and misinformation on its platforms, yet
it is a darling of investors, who prize the earning power of its
targeted advertising.
The company's stock has risen more than 50% since the beginning
of the year, despite a pile of regulatory and legal challenges and
a skeptical reception for its plan to lead the creation of a global
cryptocurrency known as Libra.
Facebook shares climbed more than 3% in after-hours trading.
The FTC settlement puts new guard rails around Facebook's
management and how it approaches privacy, but it didn't severely
curtail the company's data collection and its ability to sell ads
based on it.
Facebook's earnings filings note that the FTC isn't done with
it: Facebook warned investors that the FTC launched an antitrust
investigation of the company in June. That probe will run along the
Justice Department's investigation announced Tuesday, which
Facebook said was an antitrust review of "market-leading online
platforms."
The earnings report demonstrated continued growth in Facebook's
"blue" app, its oldest and largest product. The company said 1.59
billion accounts used Facebook daily, with 2.41 billion accessing
Facebook monthly.
Globally, more than 2.7 billion people use at least one Facebook
product monthly.
"We had a strong quarter and our business and community continue
to grow, " Mark Zuckerberg, Facebook co-founder and chief
executive, said in a statement. "We are investing in building
stronger privacy protections for everyone and on delivering new
experiences for the people who use our services."
Facebook's operating margin fell to 27% as costs rose to $12.26
billion from $7.37 billion a year ago, primarily reflecting the
one-time charges. The company has warned it expects costs to rise
as a result of increased spending on content moderation and
regulatory compliance, though the company has avoided the sort of
spending that Chief Financial Officer David Wehner warned last year
could consistently drag down its margins.
While the adjusted earnings surpassed most analyst estimates,
all had predicted steady growth, reflecting Wall Street's
confidence that Facebook's financial performance would continue to
diverge from the company's reputational issues.
Evidence that Russian agents sought to influence the U.S. 2016
presidential election brought heavy scrutiny to Facebook in 2017,
and a series of user data leaks and privacy gaffes have dogged the
company since. Debates about whether to break up Facebook and other
tech giants arose in the Democratic primary earlier this year and
are likely to play out on cable news throughout much of the next 15
months, while the Justice Department's and the FTC's antitrust
probes are now being considered.
None of these controversies have changed Facebook's dominance of
social media, which is furthered by the popularity of its other
platforms, Instagram and WhatsApp.
Some of the risks around Facebook's rocky trajectory were
evident in its rollout of Libra, an ambitious new cryptocurrency
aimed at average consumers. In congressional hearings earlier this
month, lawmakers said they would insist on strict oversight of the
new digital money and questioned whether the company had earned the
trust such a project requires.
(END) Dow Jones Newswires
July 24, 2019 17:12 ET (21:12 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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