Amid all its privacy, regulatory and content moderation issues, Facebook Inc.’s earnings almost seem irrelevant — but not today, when the social networking giant reported results that disappointed investors.

The company actually reported better-than-expected sales of $21.08 billion in its fourth quarter, up 25% from a year ago, and also beat forecasts on profit, earning $7.35 billion or $2.56 a share, up 7%. Analysts polled by FactSet had expected adjusted earnings per share of $2.52, a 6% rise, on a 23% jump in revenue, to $20.87 billion. 

But that wasn’t profitable enough for investors, who sent shares down more than 7% in after-hours trading. The culprit appeared to be surging costs, which jumped 34%, to $12.2 billion.

Part of that was an 89% jump in general and administrative costs from settling a privacy lawsuit for $550 million. But Facebook has repeatedly warned that the higher costs of “securing the platform” would hit the bottom line at some point. Now it appears they’ve done just that, and in comments on a conference call, Chief Executive Mark Zuckerberg (pictured) implied that Facebook’s work on those issues is far from done. 

“This is going to be another critical year to making progress on social issues,” he said, especially with regard to ensuring fair elections. On that last, he insisted, “We think our systems are more advanced than any other companies’.”

Moreover, Chief Financial Officer David Wehner issued a new revenue outlook, saying it would decelerate by the low to mid-single digits from the fourth quarter thanks to the impact from global privacy regulations and ad targeting limits. “The majority of the impact lies ahead of us,” he warned.

That also weighed on shares. Shares had risen 2.5% in regular trading, to $223.23 a share. That was partly thanks to a “strong buy” recommendation earlier today from Raymond James analyst Aaron Kessler, who said his channel checks indicated strong spending on advertising. Facebook’s shares have zoomed up 53% over the past year, about double the overall market.

The company today also announced a $10 billion share repurchase program.

The disappointing fourth quarter follows a third quarter during which Facebook beat expectations on nearly every front as its advertising engine kept chugging ahead. Indeed, Facebook’s ad business continues to mint money. Ad revenue rose 25%, to $20.7 billion, as advertisers ignored much of the controversy swirling around the company.

Facebook’s headcount growth sightly outpaced that of the ad business, ending December with 44,942 people, up 26% from a year ago.

“The story for Facebook was the same in Q4 as it has been for many of the previous quarters,” said eMarketer Principal Analyst Debra Aho Williamson. “Despite all of the concerns that have been swirling around the company in the past two years, it beat expectations on revenue, and it demonstrated continued growth in its user base. This is a company that has shown that it can withstand ongoing criticism of its practices and yet still pull out gains in both revenue and users.”

She said eMarketer expects that momentum to continue into the new year. “Advertisers are expected to increase spending on Facebook (including Instagram) by 22% this year,” she said. “Separating Instagram out, we expect that property to increase its ad revenue by 54% this year, as advertisers continue to flock to Instagram for feed advertising, story advertising and also the potential for ad placements in the Explore tab.”

Despite the stock selloff, some analysts weren’t so worried. Mizuho Bank Ltd. tech analyst James Lee told clients he’s maintaining Facebook as the firm’s top pick in U.S. internet companies because of the long-term potential for 50% more upside in revenue per user, the highest among the companies it follows.

The company’s user growth doesn’t seem to be suffering much from competition from the likes of TikTok either, as Facebook added 1 million daily users in the U.S. & Canada. Some 2.26 billion users now open Facebook, Messenger, Instagram or WhatsApp daily, up from 2.2 billion in the third quarter. The apps collectively have 2.89 billion total monthly users.

Nonetheless, said Yuval Ben-Itzhak, CEO of the social media marketing platform Socialbakers, the company can’t get complacent. “Instagram still faces fierce competition from TikTok in the fight for Gen Z engagement,” he said.

Still, as Facebook itself conceded last quarter, all the issues could hit home at some point. Indeed, today Facebook said Zuckerberg will head to Brussels in mid-February to “meet with European decision-makers in Brussels to discuss a framework for new rules and regulation for the internet.”

Facebook also said today that it paid $550 million to settle a class-action class-action lawsuit in Illinois involving its use of facial recognition software in its Tag Suggestions photo labeling service. It was seen as another win by privacy groups looking to limit its use of people’s data.

Photo: Robert Hof/SiliconANGLE