Net income of $1.76 per share climbed from $1.59 per share in the same quarter a year ago to cruise past the consensus estimate of $1.48.
Monthly active users came in at 2.27 billion, falling short of the expected 2.29 billion. Revenue, similarly, came in just shy of expectations, reaching $13.73 billion, below the consensus outlook of $13.78 billion.
User growth slowing after years of spectacular numbers is causing concern both internally and externally. The company took the unusual step of warning investors that profit and revenue gains could be slower than they have been in years.
Shares of the company rallied during the trading session, as did other major tech issues. They gained almost 3% to close at $146.22 but have surrendered almost 22% of their value in 2018 to date.
The social network disclosed earlier this month that hackers had carried out a massive breach that compromised 30 million accounts, taking advantage of software vulnerabilities to steal users’ contact information, phone numbers, email addresses — and in some cases, even more data.
A group of advertisers are suing Facebook, claiming the company radically overstated the amount of time users spent watching video ads. Court documents allege the company’s engineers knew that they were using a faulty formula for calculating video views — inflating the numbers by as much as 900% — but did nothing about it for more than a year, according to the complaint.
Meanwhile, the co-founders of Facebook’s popular photo-sharing app, Instagram, made for the door. Kevin Systrom and Mike Krieger, who had enjoyed six years of relative independence and autonomy from the parent company, were chafing under greater involvement from CEO Mark Zuckerberg, who was pushing for the app to be more tightly integrated with Facebook.
Some brands cut back spending in the quarter, according to MoffettNathanson’s advertising checks. It has less to do with reaction to the lawsuit, but rather, longstanding concerns by consumer packaged goods brands like Procter & Gamble and Unilever about Facebook’s self-reporting.
“While some negative commentary may be driven by the feedback loop emanating from Facebook itself,” Michael Nathanson wrote. “We picked up a very wide range of expected growth rates that seem to vary, now more than ever, by type of advertiser, product form and agency.”
Brand advertising has given way to direct response ads on the platform, said one source familiar with Facebook’s ad sales. And the social network is increasingly relying on revenue from small and medium sized businesses.
RBC Capital Markets tech analyst Mark Mahaney also picked up signs of waning ardor, although budgets are at record levels and half of the marketers surveyed said they planned to increase their ad spending on Facebook in the future.
“We believe we are seeing a slight fading of marketer enthusiasm for core Facebook, possibly due to steadily rising pricing on the platform over the past few years, possibly in reaction to some of the negative publicity Facebook has received this year, and possibly the result of a slowing down of core Facebook’s user growth,” Mahaney wrote. “We would repeat, however, that the results for core Facebook are still intrinsically very positive.”
Facebook also continues to lead other social platforms in time spent, according to Cowen & Co.’s consumer internet survey.
Users spend about 52 minutes a day, liking, sharing and commenting on Facebook. That’s down slightly from a year ago (about 3 minutes a day) as the company promotes more interactions between users and de-emphasizes passive viewing of videos. But still more time than they invest elsewhere, according to the survey.
Cowen & Co.’s John Blackledge said Facebook continues to be the most frequently visited social media site, with 79% of those polled saying they used it at least once in the past 30 days.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.