Facebook's Stock Plummets Despite Earnings Exceeding Expectations Due to Rising Costs

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Facebook posted fourth-quarter results last year that met Wall Street expectations, CNBC reported on the 29th (local time). However, costs unexpectedly surged, causing the stock price to plunge immediately after the earnings announcement.

According to the report, Facebook's fourth-quarter revenue last year was $21.08 billion (approximately 24.9 trillion KRW), a 25% increase compared to the same period the previous year. This exceeded the $20.89 billion forecast by financial information firm Refinitiv. Earnings per share were also higher than expected at $2.56 versus the forecast of $2.53.

Mark Zuckerberg, Facebook's CEO, said, "Our community and business continue to grow, and the fourth-quarter and year-end results were strong," adding, "We will focus on building services that help people connect with each other."

However, Facebook's stock price fell by 7% immediately after the earnings announcement. CNBC attributed the stock decline to Facebook's announcement that its annual expenses last year rose 51% year-over-year to $46.71 billion. As costs increased, Facebook's operating margin dropped from 45% in 2018 to 34% last year. This is interpreted as an increase in safety and security costs as well as legal expenses related to lawsuits.

During the conference call, CEO Zuckerberg stated that he is preparing for a "tough year" ahead of the U.S. presidential election this year. He also added that the goal is to better communicate Facebook's policies on various issues. He explained, "My goal for the next 10 years is not to be 'liked' but to be understood," because "to gain trust, people need to know what they themselves support."

Meanwhile, another major IT company, Microsoft (MS), recorded $36.9 billion in revenue for the fourth quarter last year, a 14% increase compared to the same period the previous year. Net income rose 36% to $11.6 billion, with earnings per share at $1.51. Like Facebook, these results exceeded Refinitiv's expectations. Growth in the cloud business segment drove the revenue increase.

This content was produced with the assistance of AI translation services.