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Facebook posts slowest-ever sales growth; shares slump

Facebook
Ads on Instagram and videos drove Facebook’s 25% year-over-year revenue growth in the fourth quarter. Revenue totaled $21.1 billion.
(Karen Bleier / Getty Images)

Facebook Inc.’s growth is slowing, adding pressure to a company facing more restrictive privacy regulations and continued scrutiny from global lawmakers and antitrust officials.

The world’s biggest social media company reported record fourth-quarter revenue of $21.1 billion, boosted by ads on Instagram and in video. The 25% increase from the period a year earlier was the slowest-ever quarterly sales growth for the company, though it topped analysts’ average estimate of $20.9 billion. Shares fell about 7% on the news.

Facebook said it had 2.89 billion monthly active users of its products around the world, but growth stagnated in the U.S. and Canada on the main social network — the primary source of advertising sales. Monthly active users hit 2.5 billion on the main network as of Dec. 31, slightly topping analysts’ estimate of 2.49 billion.

Facebook has warned for several quarters that growing at the same rate will be more difficult in the future. The company’s trajectory is limited by the number of world internet users, most of whom already have an account on Facebook or its WhatsApp, Instagram or Messenger properties. That means finding future revenue streams will be increasingly difficult, requiring experimentation with avenues that might not pay off, such as in artificial intelligence, virtual reality and shopping.

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What Facebook “has to grapple with is a rising cost framework while each incremental dollar of revenue growth gets tougher,” said James Cakmak, a partner at Clockwise Capital.

Expenses rose 34% to $12.2 billion for the period ended Dec. 31, the Menlo Park, Calif.-based company said Wednesday in a statement.

The uncertainty comes as Facebook has fewer public cheerleaders. The company has been vilified by U.S. presidential candidates and faces new global privacy laws and two federal antitrust probes. Chief Executive Officer Mark Zuckerberg has testified multiple times before Congress about his company’s stumbles.

Still, Facebook and Google dominated digital ad spending with an estimated 61% of the market in 2019, a slight increase from a year earlier, even as Amazon.com Inc. gains sales, researcher EMarketer said in November.

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Facebook said it had 248 million monthly active users in the U.S. and Canada on its main social network at year’s end, an increase of 2.5% from the period a year earlier and just 1 million more people than at the end of the previous quarter.

The company’s stock gained 55% in the last year, closing Wednesday at a record high of $223.23 in New York.

“Facebook stock has had a huge run and investors were hoping for even faster growth, especially in the U.S,” said Richard Greenfield, an analyst at LightShed. The “bar was high,” he added, citing the stock price heading into the earnings report. “This is not broken.”

The company reported net income of $7.35 billion, or $2.56 a share, compared with $6.88 billion, or $2.38 a share, a year earlier. Analysts, on average, estimated $2.53 a share.


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