Facebook's earnings surge exceeds slow growth in users and sales

(Reuters) – Facebook Inc (FB.O) on Tuesday beat its earnings estimates Tuesday, but missed its targets for growth in the number of monthly users and announced that its revenue growth was the slowest for about six years in a quarter.

Facebook masters better costs than expected by some investors, but faces a growing number of users, resulting in two-way stock swings after the third quarter results.

Shares of Facebook soared after the bell, down 5% and up nearly 4% after Tuesday's close, up 2.9% to $ 146.22.

Shares fell again after Mark Zuckerberg, chief executive of Facebook, during a teleconference with analysts, reiterated the company's warning that changing user behavior would leave revenue and cost growth out of sync for a certain time".

He also pointed out that the costs would continue to increase to solve safety and security problems.

"The next elections will be a real test of the protections we have put in place," Zuckerberg said. "With a community of more than 2 billion people, we will see all the good and the bad that humanity can do. And we will never be perfect.

Great winners on Wall Street in recent years, internet giants including Facebook, Amazon.com Inc. (AMZN.O) and Google parent Alphabet Inc (GOOGL.O) have suffered violence in the past month.

The slowdown in growth after years of good results has been a major concern, and Facebook's weak results have highlighted some of these fears.

Nevertheless, the company cautioned against slowing profit and income growth. Facebook's spending exploded as it tried to strengthen itself against fraudsters and hackers and invested in more appealing content such as videos.

"It was a good quarter and everyone was expecting a catastrophe," said Ivan Feinseth, an analyst at Tigress Financial Partners.

James Cordwell, an analyst at Atlantic Equities, described the results as "something of a relief for the market."

Total expenses in the third quarter climbed to $ 7.95 billion, up 53% from last year. However, the operating margin decreased by only 2 percentage points compared to the previous quarter, reaching 42%.

Facebook's revenue was in line with expectations, given the company's unfavorable exchange rates.

Third quarter total revenue was $ 13.73 billion, up 33% from the same period last year and lower than the average analyst estimate of 13, $ 78 billion in Refinitiv data.

Quarterly earnings of $ 5.14 billion, or $ 1.76 per share, increased 9% over the same period last year and was above the estimated average of $ 1.48 per share.

While the growth in the number of Facebook users has slowed down, its ad sales have continued to increase because it has found ways to better target ads to generate clicks and views. Emerging companies Instagram and WhatsApp are seen as hopes to catch up with the flow of flattening the use of the main Facebook application.

Facebook lost 1 million monthly users in Europe for the second consecutive quarter. It has earned 1 million monthly users in the United States after being held steady last quarter.

The social network's reputation suffered from a data breach affecting 29 million users in September and a privacy scandal involving a British political advisory firm in March.

He has also been shaken by the war of national and international information about his services, including WhatsApp and Instagram, and by a wave of leadership departures.

Nevertheless, the company managed to win users. The company said 2.6 billion users were interacting with at least one of its apps each month, up from 2.5 billion when it first released this figure last quarter, pointing out that its potential audience for advertisers was unmatched.

Monthly and daily users of the main Facebook application, compared with last year, rose 10% to 2.27 billion and 9% to 1.49 billion, respectively. Estimates were 2.292 billion and 1.508 billion, according to Refinitiv averages.

The company stated that the third quarter figures would have been slightly higher, except that the measurement method was changed as it revealed that some user activities had been misclassified. Changes made in previous quarters were unimportant, said Facebook.

Some financial analysts are concerned that the company's operational problems are so important that costs continue to rise along with revenues.

The company's lowest quarterly growth as a publicly traded company, 32.2%, was recorded in each of its first two reporting quarters in 2012.

"The fact that problems continue to surface reinforces our view that the company does not control its operations as it should," said Brian Wieser, senior analyst at Pivotal Research, in an email this month.

Facebook has seen the biggest day of liquidation of the history of US stock markets after the publication of the gloomy forecast in July, its shares having fallen by nearly 19%.

He continues to trade at a lower price than his peers. For example, Alphabet Inc, number 1 online ads, offers 22.4 times the expected profits over the next 12 months, compared to 17.6 times for Facebook.

(GRAPH: Facebook revenue growth slowing down – tmsnrt.rs/2CO7xgt)