51% increase in expenses and contracting operating margin sees a 7% decline in Facebook’s stock

The
world-popular social network, Facebook Inc., announced better than expected earnings
and revenue in the recent quarter on Wednesday. Despite beating the analysts’
estimates, the stock was seen trading 7% lower in extended trading following
the earnings report that also highlighted a sharp
increase in Facebook’s costs and contracting operating margin.

Based
on Refinitiv’s data, analysts had expected the company to print $20.89 billion
in quarterly revenue. For earnings per share (EPS), the estimate was capped at
$2.53. Wednesdays’ report, however, recorded a much higher $21.08 billion in
revenue while a slight increase to $2.56 per share was posted on the earnings front
for the social network in the fourth quarter.

Facebook
Generated $8.52 In Revenue Per User In The Fourth Quarter

While
the count of monthly active users came in line with the forecast of 2.5
billion, daily active users were noted marginally higher at 1.66 billion versus
the FactSet’s estimate of 1.65 billion. FactSet had also expected $8.38 in revenue
per user (average) for Facebook in Q4 while the company generated a much higher
$8.52 in the recent quarter.

The
annual costs and expenses for Facebook in 2019 were reported at $46.71 billion
that marked a massive 51% increase as compared to 2018. Coupled with a
significant drop in operating margin from 2018’s 45% to 34% in 2019, the readings
weigh heavily on Facebook’s stock on Wednesday.

Facebook
grew 24.7% in terms of quarterly revenue as compared to last year. The recent
quarter was the fourth for Facebook in a row that it noted a little under 30%
of revenue growth. The company’s COO, Sheryl Sandberg, also commented on
Wednesday that Facebook now has over 8 million advertisers. The figure was
capped at 7 million in October 2019.

Facebook
Launched A $10 Billion Share Repurchase Program

Following
the earnings report on Wednesday, Facebook
has also launched a share repurchase program worth $10 billion. Across
multiple of Facebook’s platforms including Messenger, Instagram, and Whatsapp,
the company claimed to have over 2.89 billion monthly users in its Q4 performance
results versus 2.8 billion in the previous quarter.

Facebook’s
user base in the U.S and Canada expanded to 190 million in the fourth quarter
versus 189 million in the third quarter. In Europe, on the other hand, the
increase was greater from 288 million in Q3 to 294 million in the recent
quarter.

Falling
7% in after-hours trading on Wednesday, Facebook settled at around $207 per
share in the stock market that was lower than the $209 level at which it
welcomed the new year.