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Facebook’s financial results appear untarnished by Cambridge Analytica scandal

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Facebook on April 25 delivered its first quarterly earnings report since the Cambridge Analytica scandal.
(Richard Drew / Associated Press)

Facebook Inc. continued to add users and saw revenue soar in the first quarter despite facing its worst crisis in company history over the mishandling of personal data belonging to millions of unsuspecting users.

The social network blew away Wall Street estimates by reporting a nearly 50% increase in revenue from the same period a year ago, to $11.97 billion. Analysts had expected a 40% increase to $11.4 billion.

Earnings per share grew 62% to $1.69, well above estimates of $1.35. Monthly active users totaled 2.2 billion and daily active users 1.45 billion, both meeting analysts’ expectations of a 13% increase from a year ago.

Facebook shares climbed more than 6% in after hours trading after closing unmoved Wednesday.

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The results marked the company’s first quarterly earnings report since the Cambridge Analytica scandal erupted nearly six weeks ago, about halfway through the first quarter.

Facebook said as many as 87 million users could have unwittingly had their data obtained by political consulting firm Cambridge Analytica through a third-party app.

“Despite facing important challenges, our community and business are off to a strong start in 2018,” said Mark Zuckerberg, Facebook founder and CEO. “We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.”

The earnings report was closely watched for any signs of harm to Facebook’s bottom line amid a cascading controversy that has galvanized attention over privacy and sparked a backlash against behemoth tech companies.

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The Cambridge Analytica revelation set off a firestorm that resulted in testimony by Zuckerberg before lawmakers on Capitol Hill and an investigation by the Federal Trade Commission to determine if the company breached a 2011 consent decree over privacy.

Zuckerberg has repeatedly apologized for the breach, which triggered a sell-off in shares. Despite gains Wednesday, Facebook’s stock has slid 17% since an all-time high in February.

A boycott campaign popularized by the hashtag #DeleteFacebook stoked fears of an exodus that could leach to advertisers. At least three companies, Sonos, Commerzbank and Mozilla, pulled their advertising from the platform in response to the scandal.

Wall Street analysts were dubious the company would pay a heavy price — and its first-quarter results suggest they were right.

Analysts estimated that Facebook would report 1.45 billion daily active users the first three months of this year, compared with 1.4 billion the previous quarter. Analysts also expected monthly active users to rise to 2.19 billion, up from 2.13 billion in the fourth quarter.

The results far exceeded those expectations, underscoring again the dominance Facebook commands in digital advertising along with Google.

In a call with analysts Wednesday, Zuckerberg reaffirmed the company’s commitment to advertising as its chief revenue generator despite investments in mobile payments and a user marketplace to buy and sell goods. Facebook’s critics have pointed to its heavy reliance on ads for its problem with fake news and foreign meddling.

“I know people have a lot of questions about the business model,” said Zuckerberg, who also described his testimony in Washington as a success for helping explain the company’s position on privacy and security.

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“It was an important moment for the company,” he said.

Facebook expects its costs to climb in 2018 to bolster security. The company is auditing all third-party apps to determine if any possess unauthorized user data. Other costs will come from investment in video content, virtual reality and augmented reality products.

In another sign that public anger directed at Silicon Valley hasn’t hurt business, Twitter and Alphabet, Google’s parent company, also reported strong financial results this week.

david.pierson@latimes.com

Follow me @dhpierson on Twitter


UPDATES:

3:35 p.m.: This article was updated after Facebook’s earnings call with analysts.

This article was originally published at 1:50 p.m.

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