Facebook hits 2.5b users in Q4 but shares sink from slow profits

acebook beat Wall Street estimates in Q4 but slowing profit growth beat up the share price. Facebook reached 2.5 billion monthly users, up 2%, from 2.45 billion in Q3 2019 when it grew 1.65%, and it now has 1.66 billion daily active users, up 2.4% from 1.62 billion last quarter when it grew 2%. Facebook brought in $ 21.08 billion in revenue, up 25% year- over- year, with $ 2.56 in earnings per share.

But net income was just $ 7.3 billion, up only 7% year- over- year compared to 61% growth over 2018. Meanwhile, operating margins fell from 45% over 2018 to 34% for 2019. Expenses grew to $ 12.2 billion for Q4 2019, up a whopping 34% from Q4 2018. For the year, Facebook’s $ 46 billion in expenses are up 51% vs 2018. One big source of those expenses? Headcount grew 26% year- over- year to 44,942, and Facebook now has over 1000 engineers working on privacy.

While Facebook’s user base keeps growing rather steadily, it’s having trouble squeezing more and more cash out of them with as much efficiency.

Facebook’s Q4 2019 earnings beat expectations compared to Zack’s consensus estimates of $20.87 billion in revenue and $2.51 earnings per share. Facebook shares fell over 7% in afterhours trading following the earnings announcement after closing up 2.5% at a peak $ 223.23 today. Still, Facebook remains near its previous share price high before this month.

Facebook CEO Mark Zuckerberg had previously warned that addressing hate speech, election interference, and other content moderation and safety issues would be costly. Still, expenses grew and profits shrunk faster than Wall Street seems to have expected. Facebook will have to hope its promise of using scalable AI to handle more of these jobs comes to fruition soon.

But some might see today as the proper reckoning for Facebook penance for years of neglecting safety in favor of growth. Facebook’s CFO David Wehner confirms it has also just agreed to pay $550 million in a settlement over its violation of the Illinois Biometric Information Privacy Act. The class action suit stems from Facebook collecting users’ facial recognition data to power its Tag Suggestions feature that recommends friends tag you in photos in which you appear. The record-breaking settlement still falls far short of the $35 billion in potential penalties Facebook could have received.

Facebook’s executives are apparently bullish on its value despite the share price being at a peak, as today Facebook announced plans to grow its share- repurchase program by $ 10 billion, adding to its previous authorization of buying back up to $ 24 billion worth.

Facebook managed to add 1 million daily users in the U. S. & Canada region where it earns the most money after returning to growth there last quarter following a year of slow or no growth. Facebook’s stickiness, or daily to monthly active user ratio remained at 66% amidst competition from apps like TikTok and a resurgent Snapchat.