Facebook shares slump after results show slowing growth, despite record fourth-quarter revenue

Facebook’s growth is slowing, adding pressure to a company facing more-restrictive privacy regulations and continued scrutiny from global lawmakers and antitrust officials.

The world’s biggest social-media company reported record fourth-quarter revenue of US$21.1 billion, boosted by ads on Instagram and in video. The 25 per cent increase from the period a year earlier was the slowest-ever quarterly sales growth for Facebook, though it topped analysts’ average estimate of US$20.9 billion. Shares fell about 7 per cent in extended trading on the news.

Facebook said it had 2.89 billion monthly active users of its products around the world, but growth stagnated in the US and Canada on the main social network – the primary source of advertising sales. Monthly active users hit 2.5 billion on the main network as of December 31, slightly topping analysts’ estimate of 2.49 billion.

While Facebook and Alphabet’s Google dominate digital advertising sales, Facebook has warned for several quarters that growing at the same rate will be more difficult in the future. The company’s trajectory is limited by the number of world internet users, most of whom already have an account on Facebook or its WhatsApp, Instagram and Messenger properties. That means finding new revenue streams will be increasingly challenging, requiring experimentation that might not pay off, such as in artificial intelligence, virtual reality and shopping.

What Facebook “has to grapple with is a rising cost framework while each incremental dollar of revenue growth gets tougher,” said James Cakmak, a partner at Clockwise Capital.

Expenses rose 34 per cent to US$12.2 billion the period ended December 31, the Menlo Park, California-based company said Wednesday in a statement.