Tuesday 6 December 2016

Growth fears see Facebook shares fall most in nine months

Sarah Frier

Published 04/11/2016 | 02:30

Facebook reported third- quarter sales grew 56pc to $7.01bn, topping analysts’ average estimate of $6.92bn. Photo: Reuters
Facebook reported third- quarter sales grew 56pc to $7.01bn, topping analysts’ average estimate of $6.92bn. Photo: Reuters

Facebook shares slumped the most in nine months yesterday after executives suggested the company probably won't be able to keep up with its explosive pace of growth much longer.

  • Go To

The stock dropped as much as 5.5pc yesterday morning after two sobering comments on its conference call the night before.

First, chief financial officer David Wehner said revenue growth rates will come down "meaningfully" next year, because the company won't keep increasing the percentage of ads that Facebook users see in their news feed.

Second, capital expenditures will rise "substantially" in 2017 as the social network works to build data centres and recruit the best engineers, he said.

"As we slow ad load growth, we're going to have a slowing of revenue as well," Mr Wehner said. "It's been one of the key factors in terms of driving growth."

Facebook reported third- quarter sales grew 56pc to $7.01bn, topping analysts' average estimate of $6.92bn. It was the fourth straight quarter of more than 50pc revenue growth.

Facebook generated 84pc of its advertising sales from mobile phones, unchanged from the prior quarter.

Advertising provides more than 97pc of the social network's revenue.

As the Menlo Park, California-headquartered company spends money on new areas like virtual reality and mobile messaging that may not generate revenue for years, its performance is tied to its main advertising business, particularly on mobile phones. Facebook and Google have driven the growth in digital advertising spending, together capturing 68pc of that revenue in the first half of this year, according to the Interactive Advertising Bureau, a non-profit industry group. (Bloomberg)

Irish Independent

Read More

Promoted articles

Editors Choice

Also in Business