Facebook braces for $5bn hit after privacy scandals
An ongoing probe into a slew of data breaches at Facebook has left the social media giant braced for a financial hit of up to $5bn (£3.9bn) in fines and legal costs.
The social media giant’s profit for the first three months of this year more than halved year-on-year to just $2.4bn, with earnings per share of 85 cents compared to $1.69 in 2018. Analysts had been expecting earnings per share of $1.62.
In a results release last night, Facebook attributed the profit drop to a $3bn legal expense accrued as part of an inquiry by the US Federal Trade Commission into the Cambridge Analytica data scandal. It said the overall loss as a result of the investigation could rise as high as $5bn over time.
Read more: Facebook uploads email contacts of 1.5m new users in latest privacy blunder
The fall is the first time Facebook has posted a drop in profit since 2015, when it acquired Whatsapp in a $19bn tie-up.
Investors were undaunted by the slip, with shares up almost ten per cent after-hours on the back of Facebook’s rising revenue. Ad sales grew 26 per cent year-on-year to reach $15.1bn, beating analyst estimates.
Facebook’s costs jumped 80.5 per cent to $11.8bn during the quarter, as the company sought to beef up its security and improve content across its family of platforms. The firm hired 10,000 new employees in the last 12 months, accounting for more than a quarter of its employee base.
Read more: Nothing but the truth: Inside Facebook's UK fact-checking war room
Monthly active users across its products – Facebook, Messenger, Whatsapp and Instagram – rose eight per cent to 2.38bn, beating expectations of 2.37bn according to Refinitiv.
“Advertisers continue to be stuck on Facebook, despite its many challenges,” said Emarketer principal analyst Debra Aho Williamson.
“What they care most about is its vast user base and its targeting capabilities, and both are continuing to provide strong performance for them.”
Facebook is also currently facing 10 separate probes by the Irish data regulator, which oversees its activities in Europe.