NEW YORK (AP) — Facebook delivered fourth-quarter results above Wall Street's expectations on Wednesday and sought to show that it has finally transformed into a "mobile company" after rising to dominance as a Web-based social network.
But its stock dropped in after-hours trading as investors placed more significance on the company's growing expenses rather than on its increasing user base and higher advertising revenue.
"Everything was slightly better than expected," said Wedbush Securities analyst Michael Pachter. "I don't see anything here that would make me want to sell the stock."
Nonetheless, Facebook's stock fell $1.11, or 3.6 percent, to $30.13 in after-hours trading following the earnings report.
Facebook Inc. grew its revenue and increased the percentage of it that comes from mobile advertising — a closely watched figure. But expenses also grew sharply. The company also said 2013 will be a year of "significant investments" and hiring as it focuses on long-term growth rather than short-term profits.
The world's largest social media company earned $64 million, or 3 cents per share, in the October-December period. That's down 79 percent from $302 million, or 14 cents per share, a year earlier when it was still a privately held company.
Revenue rose 40 percent to $1.59 billion from $1.13 billion, surpassing analysts' expectations of $1.51 billion.
Advertising revenue grew 41 percent to $1.33 billion, increasing at a faster clip than in the third quarter, when it climbed 36 percent to $1.09 billion.
Excluding special items, mainly related to stock compensation expenses, Menlo Park, Calif.-based Facebook earned 17 cents per share in the latest quarter. Analysts polled by FactSet expected lower adjusted earnings of 15 cents per share.
"There were no major red flags," said Raymond James analyst Aaron Kessler. "I think expectations may have even been just a little bit higher" than analyst estimates indicated, which may be another reason for the stock price drop.
Facebook's biggest challenge lies in mobile devices. Most Facebook users access it using a mobile phone or tablet computer, yet the 9-year-old company only started showing mobile ads about 9 months ago. Investors have been worried that Facebook isn't taking advantage of its growing mobile user base since before the company's initial public offering in May. Analysts said Wednesday's results show that it is on the right track.
Facebook said it generated 23 percent, or $306 million, of advertising revenue from mobile. That's up from 14 percent or $153 million in the third quarter, the first time it disclosed such information.
Facebook views the mobile space as its biggest opportunity, a point CEO Mark Zuckerberg sought to drive home during Facebook's conference call with analysts.
"It allows us to reach more people, we have more engagement from the people we reach and I think we will be able to make more money for each minute people spend with us on ... mobile devices," he said.