Facebook eases past Wall Street estimates, sees spending up in 2017

Wed Feb 1, 2017 8:03pm EST
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By Rishika Sadam and David Ingram

(Reuters) - Facebook Inc (FB.O: Quote) cruised past Wall Street's earnings and revenue expectations on Wednesday with strong growth in its mobile ad business, demonstrating that controversy over so-called "fake news" and inaccurate advertising measurements had little impact on its financial performance.

With quarterly profit of $3.57 billion, more than double the $1.56 billion it reported a year ago, the company showed no signs of slowdown in growth. The results handily beat analysts' expectations, and shares ticked up about 0.2 percent in after-hours trading.

The company had warned in November that ad growth would likely slow "meaningfully" due to limits on ad load - the total number of ads Facebook can show to each user. But there was little sign of that in the fourth quarter as total revenue soared to $8.81 billion from $5.84 billion a year ago.

"I think the rate of growth will decline, but it will remain very high," said analyst Michael Pachter of Wedbush Securities. "They grew 57 percent in 2016, and our current model has 'only' 38 percent revenue growth in 2017. That's still pretty impressive."

Facebook suffered a slight setback just before the market close when a jury in Texas ordered Facebook, its virtual reality unit Oculus, and other defendants to pay a combined $500 million to ZeniMax Media Inc, a video game publisher, for violating a non-disclosure agreement. [nL1N1FM20U]

But the company's core business continued to power ahead as mobile advertising accelerated; it now accounts for 84 percent of ad revenue, up from 80 percent a year ago.

Chief Executive Mark Zuckerberg told analysts on a call on Wednesday that the company expects a major ramp-up in hiring and other spending during 2017 as it invests in video and other priorities.

Zuckerberg said the focus would be on generating short-form, original videos, especially professionally created "episodic content" produced week-to-week.   Continued...

The Facebook logo is displayed on their website in an illustration photo taken in Bordeaux, France, February 1, 2017. REUTERS/Regis Duvignau