By Deepa Seetharaman 

Facebook Inc. is scheduled to announce third-quarter earnings after the market closes on Tuesday. Here's what you need to know:

EARNINGS FORECAST: Facebook is expected to report a quarterly profit of $1.46 per share, down about 8.2% from the prior year's earnings per share of $1.59, according to data compiled by FactSet. Many analysts expect Facebook's costs to jump, as it spends big on video content, artificial-intelligence technology and platform security.

REVENUE FORECAST: Analysts predict Facebook will report revenue of $13.77 billion, up about one-third from the prior year.

WHAT TO WATCH:

GROWTH PROJECTIONS: In late July, Facebook suffered the biggest-ever one-day loss in market value for a U.S.-listed company after warning about slowing growth for the rest of the year. Facebook shares have yet to recover, with the stock price down roughly 35% from July 25 as of Monday evening. The company's falling share price could have an outsize effect on internal morale, especially when coupled with near-relentless external criticism of Facebook's products, current and former employees have said. Investors will be watching closely to see if Facebook's outlook shifts significantly.

AD DEMAND FOR STORIES: One key factor shaping Facebook's financial future is advertising demand for its Stories product, which allows users to post photo and video montages that disappear after 24 hours across its app. Facebook executives expect more people to use Stories than browse the Facebook news feed next year. But according to Credit Suisse, ads in Facebook Stories may cost about half of those in the main news feed. "A few (advertising agencies) have started to question the sustainability of rising prices on the core platform as Stories has yet to be adopted by a wide swath of advertisers," MoffettNathanson's founding partner Michael Nathanson wrote in a note last week.

THE COST OF SAFETY: Over the last year, Facebook executives have said they are willing to sacrifice profits to minimize the downsides of its services. So far, users haven't abandoned the Facebook platform en masse -- and likely won't -- but the company is still facing a growing list of serious problems that it is promising to manage. That means rising costs. "We're not doubting they can't be fixed, but the fact that problems keep emerging reinforces our view that the company is not as in control of its business as it needs to be," said Pivotal Research analyst Brian Wieser. "As problems are fixed, costs will rise, possibly faster than the company has anticipated."

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

 

(END) Dow Jones Newswires

October 30, 2018 06:14 ET (10:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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