Facebook beats profit estimates, sets aside $3 billion legal expense

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Facebook Inc’s shares on Wednesday, increased more than 10 percent to $200.50 in after-hours trade, blowing past Wall Street profit estimates in the first quarter. This means Facebook has now regained much of the ground lost last year amid slowing growth and costs associated with the company’s privacy scandals.

The world’s biggest online social network has also set aside $3 billion to cover a settlement with U.S. regulators, calming investors who had worried about the outcome of a months-long federal probe.

The settlement accrual, which Facebook said could rise as high as $5 billion, cut the company’s net income in the first quarter to $2.43 billion, or 85 cents per share.

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Excluding the charge, Facebook would have earned $1.89 a share, up from $1.69 in the year-ago quarter and easily beating analysts’ average estimate of $1.63 per share, according to IBES data from Refinitiv.

Total first-quarter revenue rose 26 percent to $15.1 billion from $12.0 billion last year, again beating analysts’ average estimate of $15.0 billion.

“This is a strong report suggesting that advertisers still see value in Facebook’s platform, as they did before the controversies and scandals erupted,” said Haris Anwar, senior analyst at financial markets platform Investing.com.

Monthly and daily users of the main Facebook app were both up 8 percent compared to last year, to 2.4 billion and 1.6 billion, respectively, in line with forecasts.

Total expenses in the first quarter were $11.8 billion, including the settlement accrual, up 80 percent compared with a year ago as the company hired content moderators and invested in new security controls to make its social networks safer.

Executives said in a conference call with investors that they expected expenses to grow 47 to 55 percent this year, updating their earlier forecast of an increase of 40 to 50 percent.

The first-quarter operating margin fell to 22 percent from 46 percent a year ago, but would have been a comfortable 42 percent without the one-time expense.

Yetunde Adegoke

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