Facebook Swells to 1.4 Billion Daily Users in Q4, Stock Tanks 4 Percent After-Hours

Social network beats revenue estimates for the 11th straight quarter

Even as major changes to the News Feed decreased time spent on Facebook by 50 million hours each day, the social network continues to print money, with the company beating analyst revenue expectations when it released its Q4 earnings on Wednesday afternoon.

The social network posted revenue of $12.97 billion and earnings of $1.44 a share for the three months ended Dec. 31 — with the company pointing to $0.77 drop in EPS due to a change in U.S. tax laws. On average, analysts anticipated Facebook would report $12.55 billion in sales and $1.95 a share in earnings.

The $13 billion in sales wasn’t enough to satiate Wall Street, however, with shares of Facebook falling more than 4 percent after hours to below $180 a share.

CEO Mark Zuckerberg said the company is cutting back on viral videos to create more “meaningful connections” in 2018 for users.

“2017 was a strong year for Facebook, but it was also a hard one,” said Zuckerberg in a statement. “In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society. We’re doing this by encouraging meaningful connections between people rather than passive consumption of content. Already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day. By focusing on meaningful connections, our community and business will be stronger over the long term.”

The cash haul represented a 47 percent jump in revenue year-over-year — giving the Menlo Park, Calif.-based company its 11th straight quarterly revenue beat. But Facebook came in slightly below analyst estimates for users, with 1.4 billion daily users and 2.13 billion monthly users missing projections of 1.41 billion and 2.14 billion, respectively. Both figures represented a 14 percent increase year-over-year. Its popularity in the U.S. appears to have waned, though, with a decline from 185 million to 184 million daily domestic users from last quarter.

Once again, mobile advertising did the heavy lifting, accounting for 89 percent of ad revenue in Q4 — a 1 percent increase from the previous quarter.

It was another busy three months for the social network. The fallout from the 2016 U.S. election — where Russian trolls leveraged Facebook to spread disinformation — continued to bring the company scrutiny. In November, Zuckerberg said he’s “dead serious” about fixing the problem. “Protecting our community is more important than maximizing profits,” said the 33-year-old co-founder.

Looking to pacify its massive audience — and keep its ad revenue rolling in — Facebook launched a tool allowing users to check if they followed Kremlin-funded pages. It also tweaked the News Feed to foster more interactions with friends and family, and introduced a two-question survey for users to rank how “trustworthy” an article is. And earlier this week, Facebook announced a shift towards promoting more local news in the News Feed.

Despite tinkering with its advertising cash cow, Facebook still has several avenues to rake in ad dollars, between Messenger, WhatsApp, and Instagram. Facebook’s Watch, its original video platform launched last summer, has flown under the radar. Nevertheless, it’s been surprisingly popular with a younger demo, according to Morgan Stanley, with 40 percent of users between 16-34 checking out Watch content on a daily basis.

While Facebook’s stock took an initial hit after announcing its changes to News Feed, Wall Street had remained bullish heading into earnings. Shares traded near its all-time high of $190 heading into Wednesday, closing the day at about $186.50 a share.

The company will hold a conference call to discuss its earnings at 5 p.m. PT.