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Facebook's sales, earnings growth slows



Facebook
Inc.


FB 2.91%

reported lower revenue than expected in the third quarter, warning that transformation in its core businesses is at an early stage, resulting in slower growth and higher costs will lead in the short term.

The results, along with the Company's guidance, have been broadly well received by investors, many of whom feared that the Company's earnings report in July resulted in a historic slump in the stock price.

CEO Mark Zuckerberg said the main Facebook service has so far made an erratic transition from news feed format to increasingly popular but less lucrative products such as stories that allow users to share photo and video montages after 24 Hours disappear. 1

9659006] The shift "was not as smooth as I had hoped," Zuckerberg said Tuesday, even though he said the format of Facebook stories "is growing rapidly and I think we'll be in a better position soon." Also, help ads in videos earn "significantly less per minute" than those shown in the news feed.

Mr. Zuckerberg added that he believes that the company is at least one year away from improving its internal systems to prevent misinformation and abuse "at the level we desire".

"I expect 2019 to be another year of significant investment, throughout the enterprise," he said.

As investors digested the profits and guidance of Facebook executives, the share price rose in after-hours trading There was a sharp jump in Mr. Zuckerberg's remarks and then jumped as fast as Facebook ended its call with analysts late Tuesday, adding more than 4%.

All in all, investors' responses were similar In July, when the company warned of a slowdown in second-quarter earnings, Facebook stock suffered the largest single-day loss ever recorded by a publicly traded US company, with market value falling by nearly $ 120 billion.

SunTrust Robinson Humphrey analyst Youssef Squali said he was "relieved" by Tuesday's report.

"One year ago, when everything went well ef, we assumed that everything would be great for a longer period of time, "said Mr. Squali, who has a" buy "rating on Facebook shares. "Now we have adjusted a bit – we have the fear of God in us."

For the third quarter, Facebook reported earnings per share at $ 1.76, compared to $ 1.59 a year earlier, and analyst projections surpassed $ 1.46 that were compiled by FactSet. Facebook's net income increased from $ 4.71 billion to $ 5.13 billion. The 9% increase in profit was the slowest growth in quarterly earnings since the second quarter of 2015, according to FactSet.

Sales increased 33% to $ 13.73 billion, down slightly from $ 13.77 billion. USD. The percentage increase was the lowest in six years, FactSet said.

Prior to Tuesday's earnings report, Facebook shares had fallen 20% since the start of the year and around 34% since their earnings report at the end of July. The decline in the share price is part of a larger investor pattern fleeing from giant technology companies like Google parents

alphabet
Inc.

and

Amazon.de
Inc.,

that saw a startling sales growth in the last week.

About 1.5 billion people use Facebook every day and 2.3 billion use it every month. These figures roughly lived up to expectations.

Facebook's biggest source of growth for users is in developing markets, particularly in Asia, where about $ 2.67 per user is generated. Facebook's user base has barely grown in the most lucrative markets, the US, Canada and Europe. Facebook earns $ 27.61 for every user in the US and Canada and $ 8.82 for its European customer base.

This year was probably the hardest time in Facebook's nearly 15-year history. Critics have attacked the company's lax privacy practices after Facebook announced that it had shared user records with a third party, who then sold the information to political analyst Cambridge Analytica.

Facebook was also criticized for failing to enforce its content policies and the possibility that false information infects the various apps.

Facebook is pushing for slower growth in its advertising business, which generates the majority of its revenue from ads appearing on the Facebook newsfeed. Users now use various features such as stories, videos and private messages. This will likely replace some of the time they are currently spending in the newsfeed.

Dave Wehner, Chief Financial Officer, said Facebook's advertising growth would bring more growth Products and areas where Facebook does not make so much money but has to spend a lot of money to stay competitive.

Concerning video, Mr. Zuckerberg said Facebook has seen an increasing use of its video-centric products like Facebook Watch and IGTV – but remained "far behind" the alphabet of YouTube, which he described as the main rival of Facebook in the video. Facebook is also facing stiff competition in the messaging area

Apple
Inc.,

"This is what iMessage offers for all its devices," Zuckerberg said.

The executive said Apple had an edge over Facebook because it could bundle iMessage with iPhones, especially in the US.

and Android like all over Europe, people prefer our services, "said WhatsApp and Messenger, Zuckerberg said.

Write to Deepa Seetharaman at [email protected]


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