Facebook anticipates an FTC privacy fine of up to $5B US

With earnings weighed down by hefty legal bills, the social media giant reported first quarter net income of 85 cents US. The results missed Wall Street expectations of $1.66 per share.

The social media giant's net income per share was lower than Wall Street expectations

In this March 29, 2018, file photo, the logo for Facebook appears on screens at the Nasdaq MarketSite in New York's Times Square. Facebook's 1st quarter earnings per share were lower than expected by Wall Street analysts. (Richard Drew/Associated Press)

Facebook said it could face a fine of up to $5 billion US as the result of an investigation by the Federal Trade Commission. The agency has been investigating Facebook for possible privacy violations, but has not announced any findings yet.

The company set aside $3 billion in its quarterly earnings report Wednesday as a contingency against the possible penalty.

The one-time charge slashed Facebook's first-quarter net income considerably, although revenue grew by 25 per cent in the period. The FTC has been looking into whether Facebook broke its own 2011 agreement promising to protect user privacy.

Investors shrugged off the charge and sent the company's stock up nearly five per cent to $190.89 in after-hours trading.

Hot water over privacy lapses

Facebook has had several high-profile privacy lapses in the past couple of years. The FTC has been looking into Facebook's involvement with the data-mining firm Cambridge Analytica scandal since last March. That company accessed the data of as many as 87 million Facebook users without their consent.

The social network said Wednesday that its net income was $2.43 billion, or 85 cents per share in the January-March period. That's down 51 per cent from $4.99 billion, or $1.69 per share, a year earlier, largely as a result of the $3 billion charge.

The results missed Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $1.66 per share.

Revenue grew 26 per cent to $15.08 billion from a year earlier. Excluding the charge, Facebook earned $1.89 per share.

Analysts polled by FactSet expected earnings of $1.62 per share and revenue of $14.98 billion.

Facebook's monthly user base grew 8 per cent to 2.38 billion. Daily users grew 8 per cent to 1.56 billion.

With files from CBC News.