Shares in Facebook dropped by more than 7 per cent in after-hours trade on Wednesday, following the company posting its weakest pace of growth since going public as its business matures and privacy initiatives take hold.
Revenues in the final quarter of 2019, which come largely from advertising, rose 25 per cent year-on-year to a record $21.1bn, beating analyst expectations of $20.9bn.
However, this marked the slowest pace of sales growth since the social network floated on public markets in May 2012. In the same quarter in 2018, revenues grew by 30 per cent, for example.
Shares stood at $207.05 in after-market trading, down from a record high of $224.20 reached during the day.
Until Wednesday Facebook had rallied this year despite controversies over privacy, its content moderation and political advertising policies, and the proliferation of disinformation on the platform that have prompted attacks from across the political spectrum.
$21.1bn
Facebook’s revenues in the final quarter of 2019, which was a 25% increase year on year
David Wehner, Facebook’s chief financial officer, said he expected the growth rate to decelerate further in the forthcoming quarter, citing “the maturity of our business” as well as “global privacy regulation and other ad targeting-related headwinds”. “Though we have experienced some modest impact from these headwinds to date, the majority of the impact lies in front of us,” he added.
Facebook already warned last year of the potential impact to its business of new privacy regulations, such as Europe’s General Data Protection Regulation and the California state privacy act, as well as the introduction of more stringent privacy rules by operating systems, such as Apple’s iOS.
In addition, the company has been introducing its own privacy initiatives in the wake of the Cambridge Analytica scandal, such as the “clear history” tool that allows users more control over how Facebook and other third parties use their data.
But some analysts pointed in particular to a more pronounced slowdown in the pace of revenue growth in the US and Canada, its most lucrative market. The developed region only added 1m monthly active users compared with the previous quarter.
Others said that recent stock gains demonstrated investors were optimistic that Facebook would beat consensus forecasts by more than it did.
“The stock is off post print given the recent run up and as a sign that the top and bottom line beat relative to consensus was lower than had been expected by some,” Youssef Squali, analyst at SunTrust Robinson Humphrey, said.
Costs and expenses jumped by 34 per cent to $12.2bn in the three months to the end of December. But net income increased to a record $7.3bn, some 7 per cent higher than the previous year.
Earnings stood at $2.56 a share, above consensus analyst forecasts of $2.53, as compiled by S&P Capital IQ.
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January 30, 2020 at 05:42AM
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Facebook has slowest growth since IPO as privacy rules bite - Financial Times
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