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Facebook Inc. stock slid 7% Wednesday after the company reported fourth-quarter results that topped estimates but didn’t sate lofty Wall Street expectations. Concerns over expenses and operating margins further undercut shares.
The social-media giant said it earned $7.35 billion, or $2.56 a share, vs. expectations of $2.53 a share, according to analysts polled by FactSet.
Revenue rose 25% to $21.08 billion, vs. estimates of $20.9 billion.
“We had a good quarter and a strong end to the year as our community and business continue to grow,” Facebook Chief Executive Mark Zuckerberg said in a statement announcing the results. “We remain focused on building services that help people stay connected to those they care about.”
Monthly active users, a key barometer of Facebook’s growth globally, improved 8% to 2.5 billion, compared with expectations of 2.49 billion. Yet user growth in North America was a concern, as Facebook gained just 1 million new users in the U.S. and Canada from the previous quarter, to 248 million. In the same quarter a year ago, the figure was 242 million.
See also: Facebook earnings preview: Ready for another strong quarter
The financial results underscore the continued strength of Facebook despite a whirlwind of controversies. The company, along with Apple Inc. AAPL, +2.09% , Amazon.com Inc. AMZN, +0.26% , and Alphabet Inc.’s GOOGL, +0.43% GOOG, +0.42% Google, is the subject of an investigation by antitrust regulators.
Still, the relatively pedestrian gains in revenue and EPS disappointed some investors who expected much more. Buy-side analysts were expecting sequential revenue growth of 23%, vs. the 19% reported. An Evercore ISI report on Jan. 28 highlighted those raised expectations.
“At first glance, no change to our positive thesis on Facebook, although the modest size of the revenue and EPS beat may disappoint some investors accustomed to bigger outperformance,” analyst Colin Sebastian of Baird Equity Research said in a note Wednesday.
Analysts also pointed at Q4 costs and expenses, which jumped 34% to $12.2 billion vs. $9.1 billion a year ago. As a result, operating margins have eroded to 42% in the just-concluded quarter, vs. 46% a year ago, and 57% two years ago.
Additionally, questions linger over where Facebook will collect future advertising revenue — which accounts for nearly all of its sales — after Facebook said it would not sell ads on its WhatsApp property. Facebook continues to accept political ads on its flagship platform despite the likely political fallout.
See also: Facebook backs away from earlier plan to sell ads on WhatsApp
Facebook shares are up 48.4% over the past 12 months. The S&P 500 index SPX, -0.09% has gained about 22% the last year.
