Facebook Inc. reported third-quarter earnings Tuesday after the closing bell, beating Wall Street expectations after the company has been handling numerous public-relations crises over the past several months.
Facebook FB, +2.91% stock dropped roughly 3% in the extended session before climbing back to a 2% gain as of 4:30 p.m. Eastern time.
The Menlo Park, Calif.-based company reported $5.14 billion in net income for the quarter, which amounts to $1.76 a share, up from $4.7 billion or $1.59 a share in the year-ago period. Analysts’ average estimates for third-quarter profits were $1.46 a share, according to FactSet.
Overall, Facebook logged sales of $13.73 billion, up from $10.14 billion in the year-go period, but missed expectations for sales of $13.77 billion, according to FactSet. Facebook’s main source of revenue is ads, which brought in $13.54 billion, up from $10.14 billion in the year-earlier period. Facebook’s payments and other fees category — which includes its Oculus virtual-reality hardware — banked $188 million compared with $186 million in last year’s quarter.
Yet the company’s costs dug deeply into the bottom line, growing 53% to $7.95 billion in the third quarter, as its profits grew by 9%. Facebook continued to add to its workforce, growing its head count 45% to 33,606 in the third quarter, compared with the same period last year. Co-founder and Chief Executive Mark Zuckerberg has said in the past the company planned to hire 20,000 people to handle safety and security on its platforms.
Facebook reported 2.27 billion monthly active users and a daily user count of 1.49 billion, up 10% and 9%, respectively. In the U.S. and Canada, the company’s most profitable markets, the daily member count remained flat at 185 million, the fifth consecutive quarter it has remained flat or dropped; monthly users ticked up to 242 million from 241 million in the first and second quarters of this year.
Despite the flat or declining member growth in the U.S. and Canada, Facebook was able to earn more money from each user in those countries: it banked $27.11, up from $21.20 in the year-earlier period.
European daily users dropped to 278 million, compared with 279 million in the second quarter. Monthly usage also dropped to 375 million monthly active users from 376 million in the second quarter. Daily and monthly users grew in the Asia-Pacific region and the rest of the world.
Ahead of Facebook’s earnings, several analysts published notes suggesting that advertisers were beginning to take note of the wave of public-relations crises the company has been dealing with. Brand advertisers especially were said to be less willing to increase their budgets than in the past. For most major brands and companies, media buyers have considered Facebook a requirement when building a digital ad campaign. Smaller rivals such as Twitter Inc. TWTR, +4.54% and Snap Inc. SNAP, +7.35% are more useful for product launches or specific, short-term objectives.
Prior to Tuesday’s after-hours trading, Facebook stock has fallen 17% this year as the S&P 500 index has dropped 1.2%. The company’s stock dropped roughly 20% after its second-quarter earnings missed sales expectations and showed slowing user growth. The company also issued guidance that rattled investors.
