What's going on?
Facebook’s third-quarter profit was 20% better than investors expected – and its stock rose 1% late on Tuesday.
What does this mean?
Facebook had said that its revenue growth through the second half of 2018 would be slower than in the first, thanks to a strong dollar diluting non-US sales and users getting more control over how their data’s used – potentially resulting in fewer ad sales. Despite profit exceeding forecasts, the company’s third-quarter takings were 1% below investor expectations.
Costs at The Social Network were also a major focus for investors since the company’s been splashing out on improving data privacy and security – its latest hack affected some 30 million people. Costs grew by less than expected last quarter, however: a mere 53% increase.
Why should I care?
For markets: A thumbs up from investors.
Facebook’s shares have fallen some 30% since last quarter’s disappointing results – and investors hoped Tuesday could help turn the stock’s performance around. A recovery in user growth helped Netflix’s shares bounce back, and the same thing may be happening at Facebook. Although active users were below forecasts overall, in the US – its most mature and profitable market – user numbers continued to grow. In an interesting reversal, Snap and Twitter grew their own sales more than predicted last quarter despite lower user activity.
The bigger picture: All change at Facebook.
Management changes are part and parcel of a company’s existence – but several at once might signal something’s up. At Facebook, the founders of subsidiaries Instagram, WhatsApp and Oculus have all unfriended the company in recent months; perturbed, in at least one instance, by the direction the top dogs at Facebook had in mind for their company (tweet this). Although profit was good, Facebook’s revenue miss could see it seeking yet more ways to grow advertising on its other platforms to reignite that sweet revenue fire.