Despite Better-Than-Expected Earnings, Facebook Shares Dip

Shaking off “fake news” controversy and posting revenue that topped estimates, Facebook smashed analysts’ earnings estimates in the first quarter of the year.

Even as ad revenue popped 51 percent from a year ago, the company added 80 million monthly users in the first few months of the year.

But as investors digested a new format for the company’s earnings report, shares dipped in after-hours trade. adjusted expenses, income, tax rate, and earnings per share that are not in line with generally accepted accounting principles are no longer being reported by Facebook, the social media company said.

“Given that stock is an important part of our compensation structure, we believe that investors should focus on our financial performance with stock-based compensation included,” chief financial officer David Wehner told analysts on a conference call on Wednesday.

By generally accepted accounting principles, on revenue of about $5.38 billion in the year-ago period, the figures for Facebook were way up from first-quarter earnings of 60 cents per diluted share.

Wall Street is getting its chance to grill Mark Zuckerberg on Wednesday night, weeks after he laid out his vision for Facebook’s “Act Two,” in augmented reality.

“We had a good start to 2017,” Zuckerberg said in a statement with Wednesday’s earnings release. “We’re continuing to build tools to support a strong global community.”

By connecting advertisers to its massive user base, the social media platform makes most of its money. Reporting higher than the $7.68 billion expected by a StreetAccount estimate, it earned $7.86 billion in advertising revenue, up 51 percent from a year ago. Also, higher than the $4.17 expected by StreetAccount, the average revenue per user was $4.23.

Zuckerberg told analysts on a conference call that the daily watch time of live video has quadrupled since last year.

But if warnings from prior quarters are any indication, the hot streak may not last much longer.

Wehner said in November that along with user growth and increasing time spent on the platform, increasing ad load — the number of ads on the website — has been one of three main factors of Facebook’s growth. But Wehner said at that time that ad load could “come down meaningfully” after mid-2017. And weighed on the company are issues like accusations of promoting fake news and extreme videos.

After gruesome and violent acts have been streamed on Facebook Live, hiring of thousands of workers over the next year to monitor sensitive content was promised by Zuckerberg on Wednesday ahead of earnings.

And as headcount ballooned 38 percent from a year ago, costs rose 40 percent to about $4.71 billion, up from just $3.37 billion a year ago.

Snap, which went public this spring is a fresh new competition to the company which was not present last year. And hence to compete with Snap’s ad dollars, Facebook has unleashed a string of rival tools.

Many Snap users — 35 percent — cannot be reached on Facebook on any given day, found a new research released on Wednesday by App Annie. For Facebook’s Instagram and Messenger, the figures are even higher — 46 percent and 58 percent, respectively.

(Adapted from CNBC)

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