Facebook keeps growing with 2.38B users in Q1, but saves $3B for FTC fine

A massive penalty hangs over Facebook’s head, but it otherwise had a very strong Q1 earnings report. Facebook reached 2.38 billion monthly users, up 2.5 percent from 2.32 billion in Q4 2018 when it grew 2.2 percent, and it now has 1.56 billion daily active users, up 2.63 percent from 1.52 billion last quarter when it grew 2 percent. Facebook pulled in $15.08 in revenue, up 26 percent year-over-year compared to Refinitiv’s consensus estimates of $14.98 billion in revenue. Facebook recorded earnings per share of $0.85 compared to estimates of $1.63 EPS. However, that’s beacuse Facebook has set aside $3 billion to cover a potential FTC fine that it’s still resolving. Without that fine, it owuld have had an EPS of $1.89.

Facebook’s share price rose 4.89 percent to $191.50 after closing before earnings at $182.58, way up from its recent low of $124.06 in December. Wall Street seems to have already priced in the potential FTC fine. Facebook has agreed to strict oversight of how it handled user privacy in a 2011 deal with the FTC. It promised to not misrepresent its privacy practices or change privacy controls without user permission, and it’s now being investigated for potentially breaking those terms.

Facebook wrote in its earnings release about the FTC fine that:

“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet. We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”

This is the first earnings report of a full quarter following Facebook’s worst-ever security breach in September that impacted 50 million users, shaking confidence in the social network’s privacy and security. It’s also the first full quarter in which Facebook sold its own branded hardware — its Portal video chat device that was well received by critics except for the fact that it was made by Facebook.

Yet the defining story continues to be Facebook’s struggle with claims that its developer platform endangered user privacy and steamrolled competitors in search of growth. The fact that Facebook isn’t losing massive numbers of users after years of sustained scandals is a testament to how deeply its woven itself into people’s lives.

This post was originally posted at http://feedproxy.google.com/~r/Techcrunch/~3/sRb7wpaZ98E/.

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