Facebook shares dip from high as investors fret over costs, future profit

Thu May 4, 2017 1:27pm EDT
 
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By Rishika Sadam and David Ingram

(Reuters) - Facebook Inc reported surging quarterly profit and revenue on Wednesday, helped by its fast-growing mobile ad business, but its shares dipped from a record high in after-hours trading as investors showed some nervousness about future earnings.

The world's biggest online social network, which is nearing the five-year anniversary of its initial public offering, is searching for new types of advertising features to supplement its main revenue streams that it expects to cool off this year.

Facebook's shares fell 2.4 percent in after-hours trading to $148.12. They had closed at an all-time high of $153.60 on Tuesday.

Chief Financial Officer David Wehner said on a conference call after the company's earnings announcement that ad revenue growth is expected to come down significantly over the rest of 2017, repeating prior company warnings that it is hitting a limit in "ad load," or the number of ads it can squeeze onto users' pages before upsetting them.

Wehner gave similar warnings about ad load in November and in February, although a slowdown has not materialized.

New products, such as ads that play in the middle of videos or appear on Facebook's Messenger app, could fuel growth, but Wehner and Chief Executive Mark Zuckerberg said on Wednesday those plans were still in early stages.

At the same time, the company said expenses would continue at a high level, growing 40 percent to 50 percent this year over 2016 levels and putting a squeeze on future profits.

"As we look into 2017 and beyond, there are going to be a number of initiatives we believe are valuable to the community and to the company in the long term that are going to be net negative on our operating margin," Wehner said.   Continued...

 
FILE PHOTO: The Facebook logo is displayed on the company's website in an illustration photo taken in Bordeaux, France, February 1, 2017. REUTERS/Regis Duvignau/File Photo