Big spending plans send Facebook’s shares into tailspin

October 28, 2014, 9:16 PM UTC
Facebook Holds f8 Developers Conference
SAN FRANCISCO, CA - APRIL 30: Facebook CEO Mark Zuckerberg delivers the opening keynote at the Facebook f8 conference on April 30, 2014 in San Francisco, California. Facebook is hosting the one-day developers conference for the first time since 2011, with over 1500 developers expected to attend. (Photo by Justin Sullivan/Getty Images)

Facebook on Tuesday said strong advertising sales lifted third-quarter revenue by 59%. But its shares tumbled 9% in after-hours trading after the company warned it would spend more than expected in 2015. Here are the key points from the company’s earnings report.

What you need to know: Facebook reported quarterly sales of $3.2 billion, which beat Wall Street’s estimates for the social media giant by about $100 million. Those sales numbers were also up sequentially, beating the $2.9 billion figure Facebook posted in this year’s second quarter, which itself represented a 61% bump year-over-year.

In what CEO Mark Zuckerberg blandly called “a good quarter with strong results” in Facebook’s earnings release, the company also reported a $806 million profit, or 30 cents a share, which was up from $425 million and 17 cents a share during the same quarter last year.

But investors focused on comments made by the company’s chief financial officer that Facebook would sharply increase spending next year on hiring and acquisitions. Expenses are expected to rise by 55% to 75%, far more than analysts had predicted.

Facebook’s shares (FB) almost immediately went into free-fall, down as much as 11% at one point in after-hours trading. They later recovered slightly, but were still down 9%.

Facebook also said Tuesday that its number of monthly active users (MAUs) hit 1.35 billion in September, which was up 14% year-over-year and represented a slight improvement over the 1.32 billion MAUs the social network had at the end of the second-quarter. Active users on mobile devices increased 29% last month. Facebook’s daily active users in September grew 19%, to 864 million, from the same month last year, while mobile daily active users improved by 39%.

The big number: As was the case earlier this year, Facebook’s quarterly sales jump was driven mainly by improved advertising sales, which were up 64%, to $2.96 billion. Mobile ads represented about 66% of the company’s total quarterly ad sales, which would be roughly $1.95 billion. In the third quarter of 2013, mobile ad sales represented about 49% of overall advertising revenue and they made up 62% of that figure in this year’s second quarter.

Facebook has made mobile ad growth a key focus this year and the results are showing as the company is expected to grow its share of the $36.5 billion global mobile ad market to 20.4% this year, up from 16.5% in 2013, according to research firm eMarketer.

What you might have missed: Facebook became the second high-profile tech company in as many days to suffer a dip in its stock price despite posting quarterly financials that were more or less in line with analysts’ expectations. On Monday, Twitter’s (TWTR) shares fell after that company announced third-quarter numbers that were also expected by Wall Street, though Twitter did report widening losses.

(Story was updated with new information from earnings call and after-hours trading)