Facebook sees growth in Q3 profits and users despite scandals

Facebook Inc., which had warned of rising costs and slowing growth, reported quarterly revenue roughly in line with expectations and profit that beat analysts’ forecasts. And despite scandals around fake news and election interference, it added users, too.

Third-quarter revenue rose 33 per cent to US$13.73 billion, compared to the US$13.8 billion analysts estimated. Profit rose to US$1.76 a share, well ahead of Wall Street projections, according to data compiled by Bloomberg.

Monthly active users totalled 2.27 billion, up 10 per cent from a year earlier. Three analysts surveyed by Bloomberg expected 2.28 billion, on average. Facebook changed how it counts users, and without that update MAUS would have been 2.28 billion in the period, it said.

Facebook earlier this year said revenue growth rates would decline in the third and fourth quarters, sending shares plummeting. That set a low bar for Tuesday ’s results. Facebook shares slipped 1.5 per cent in extended trading after closing at US$146.22 in New York.

“Facebook grew revenue at a nice pace in the important U.S. and Canada markets,” EMarketer analyst Debra Aho Williamson said. “Facebook also managed to eke out a small usage gain in the U.S. and Canada. After the flatness we saw last quarter, that’s a good sign.”

Maintaining growth in developed markets like the U.S. is important because the new users that Facebook brings on in other parts of the world are usually in less-lucrative advertising markets.

The results suggest that advertisers continue to buy more Facebook ads. And they’ve embraced Instagram, the photo-based social network that passed one billion users.

“Facebook continues to be a dominant force in not just social media, but also advertising as a whole, and counters some of the recent pessimism,” Mark Mahaney, an analyst at RBC Capital Markets, said in a note to investors before the results.

Future revenue growth depends on Facebook’s ability to shift marketers’ interest to new formats — specifically ads in messaging and marketing spots embedded in a popular way of sharing called “stories,” especially on Instagram. In those formats, users post videos about their day that disappear within 24 hours. Users tap through them and see ads in between.

So far, the formats are less lucrative than advertising on the main social network’s news feed.

The earnings report comes a week before an even bigger test for the company: the U.S. midterm elections. Facebook’s executives have touted their commitment to avoid the missteps of the 2016 election, when Russia ran a misinformation campaign that disrupted U.S. politics. Facebook has been investing in safety and security, hiring thousands to monitor user complaints and investigate unusual activity, while improving its technology to take down fake accounts and pages.

Facebook has been working to restore trust with users after a scandal in March over user data that an app developer shared with a political consultant.

More recently, about 14 million people had sensitive information accessed by hackers.