Facebook Q3 results beats expectations; investor baulk at operating cost outlook

Facebook revenues beat expectations but inward investment plans send shares lower in after hours trading.

Facebook Q3 results beats expectations; investor baulk at operating cost outlook

Facebook’s third quarter earnings report held some impressive numbers. But, a 47% rise in revenues wasn’t enough to keep Facebook shares in the green in after hours trading.

Usually, revenue growth that beats expectations is a supportive element of any earnings report. But not this time. Instead, investors focussed on Facebook’s operating expenses plans, which are set to rise by between 45% and 60%, the tech firm said.

Facebook shares ended the Wednesday US trading session 1.4% higher ahead of the social media giant’s earnings release. Following the release of the Q3 earnings report – after the closing bell in the US – shares lost some 1.9% in after-hours trading.

Spending plans bite

Although revenues hit $10.3 billion and profits were up at $4.7 billion, it was Facebook CEO Mark Zuckerberg’s comments on inward investment plans, that held investors’ attention.

“We're serious about preventing abuse on our platforms,” Zuckerberg said in the earnings release. “We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”

He reiterated the point in the earnings call shortly after the release too.

“I've directed our teams to invest so much in security on top of the other investments we're making that it will significantly impact our profitability going forward, and I wanted our investors to hear that directly from me,” Zuckerberg said in his opening statement.

Russian ad use affect

While it appeared investors weren’t too concerned with the Russian ad abuse issue, Facebook’s owner and founder, Zuckerberg, most certainly is.

He spent the main portion of his opening statement talking about how he was unhappy with the way in which the social media platform was abused in the run up to the 2016 US election. He outlined a number of areas in which Facebook will work to limit ad abuse and make the platform safer for its users.

Aside from ad abuse, other details showed that ad revenue growth was strong – in line with expectations and following a similar picture from Google. Both user growth and mobile ad sales were healthy.

Facebook investors can only hope for more of the same to balance out the inward investment plans for the future.  

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