How Facebook went so wrong so fast

2) Investors didn’t take Facebook’s hints. While investors could justifiably claim surprise at the forecast of a growth slowdown, perhaps they shouldn’t have been surprised about squeezed profit margins. The company has been saying for months that it was increasing spending drastically for a range of priorities, including hiring more people and devoting more technical resources to prevent its digital hangouts from being overrun by misinformation, politically motivated propaganda and incitements to violence. Facebook is also doubling down on programming for its web video services and for its global network of computer data centers.

The company forecast that its operating costs would increase by as much as 60 percent this year compared with 2017, although analysts tended to dismiss that forecast as too high. It now looks as though that estimate won’t be far off. To defend investors, however, perhaps the most alarming thing in Facebook’s litany of alarms was a prediction of a sharp pinch on profit margins for the foreseeable future. The company forecast operating profit margins somewhere near 35 percent over the next several years. That is a stunning deceleration both from recent history — that margin was 45 percent in the first half of 2018 — and from investors’ expectations of profit margins around 44 percent in 2019 and 2020. That was a stunner.

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