META Meta Platforms Inc

By Deepa Seetharaman 

Facebook Inc. recorded lower revenue than expected in the third quarter as the social-media giant continues to adjust to slowing growth rates.

Facebook's profits were higher than analysts had expected. Following the results, the company's stock price rose more than 2% to $149.38 in after-hours trading.

For the third quarter, Facebook reported earnings per share of $1.76, up from $1.59 a year earlier, beating analyst projections of $1.46 per share, according to data compiled by FactSet.

Revenue leapt 33% $13.73 billion, falling slightly short of expectations of $13.77 billion.

Before Tuesday's earnings report, Facebook shares had fallen about 20% year to date and about 34% since its last earnings report in late July. The decline in shares is part of a larger pattern of investors turning a cold shoulder to giant tech companies like Google parent Alphabet Inc. and Amazon.com Inc., which posted underwhelming sales growth last week.

This year marks perhaps the most difficult periods in Facebook's nearly 15-year history. Critics have attacked the company's lax data privacy practices, following Facebook's disclosure that it provided user records to a third party, which then sold the information to political analytics firm Cambridge Analytica. Facebook also has been criticized for its failure to enforce its content policies and allowing misinformation to infect its various apps.

Facebook has said it previously moved too slowly to fix problems underlying its platform and promised to fix these issues.

These problems have brought regulatory and government scrutiny, and they've cut into Facebook's bottom line, as the company has said it expects costs to rise and margins to fall in coming years. Those shifts reflect Chief Executive Mark Zuckerberg's promise to sacrifice profitability in order to shore up the platform, stockpile video content and invest in advanced technologies like artificial intelligence.

Facebook also is bracing for slower growth in its advertising business, which currently collects the bulk of its revenue from ads that appear in the Facebook news feed. Facebook warned that growth would slow in the second half of the year, triggering a 35% decline in its stock price since late July. The falling share price has started to hit morale internally at Facebook, which has been buffeted by two years of nearly relentless criticism about its product and culture, according to current and former employees.

In the run-up to Tuesday's results, some advertisers said it wasn't sustainable for prices to rise on news feed ads, especially as more users embrace the Stories feature, which allows people to post text, photo and video montages that vanish within 24 hours. According to Credit Suisse, ads in Facebook Stories may cost about half of those in the main news feed.

Facebook's turmoil has hit its executive ranks, where at least a dozen senior or highly visible executives have left or announced their departures since the fall of 2017.

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

(END) Dow Jones Newswires

October 30, 2018 16:37 ET (20:37 GMT)

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