Facebook results beat forecasts but shares take a hit

Facebook agreed to pay USD 550 million over a privacy lawsuit as shares dropped even with the social media giant reporting stronger than forecast earnings.

The leading online social network said net income rose seven percent from a year ago to USD 7.3 billion, while revenue increased 25 per cent to USD 21 billion in the final three months of last year.

But in an earnings call Wednesday, Facebook chief financial officer David Wehner confirmed a USD 550 million settlement "in connection with the Illinois Biometric Information Privacy Act litigation".

The Illinois settlement -- which still requires a judge's approval -- was based on allegations that users' biometric data was illegally gathered using photo-scanning technology and then stored.

"We decided to pursue a settlement as it was in the best interest of our community and our shareholders to move past this matter," Facebook was quoted by Bloomberg as saying.

The number of people using Facebook monthly climbed eight per cent to 2.5 billion. For all its apps including Instagram, Messenger and WhatsApp, the figure was 2.89 billion.

Despite CEO Mark Zuckerberg reporting stronger than forecast quarterly earnings and user growth during the earnings call, shares dropped more than seven percent. "We had a good quarter and a strong end to the year as our community and business continue to grow," said Zuckerberg.

Investors may be concerned about the continuing increases in the amount of money Facebook spends as it pours resources into protecting privacy and preventing the network from being used as a platform for hate speech, abuse, and disinformation.

Costs in the recently ended fourth quarter rose 34 per cent to USD 12.2 billion. Facebook ended the year with its employee ranks up 26 percent to nearly 45,000.

Shares may have also been weighed down by worries about privacy regulations hobbling the company's ability to effectively target its money-making ads.