SAN FRANCISCO — Wall Street is still not sure about Facebook.
After an eight-month roller coaster ride on the public market, the company on Wednesday beat earnings expectations by aggressively ramping up targeted advertisements to its users, including on mobile phones. It reported fourth-quarter revenues of $1.59 billion, representing 40 percent growth. Analysts were looking for a 34 percent growth in revenue, to $1.52 billion in this quarter, according to analysts surveyed by Bloomberg.
Facebook earned $64 million, or 3 cents a share. Excluding certain items, Facebook said it had net income of $426 million in the fourth quarter, or 17 cents a share. Analysts had expected 15 cents a share. But after the earnings report, the stock fell over 5 percent from Wednesday’s closing price of $31.24, before recovering.
Most Facebook users log in on their cellphones, and so the most closely watched piece of the quarterly earnings was how much money the company brought in from its mobile users. It reported that advertising on the mobile newsfeed accounted for 23 percent of its ad revenues, up from 14 percent in the third quarter of 2012.
This quarter, analysts expected the company to rev it up considerably; Aaron Kessler, an analyst at Raymond James, for example, estimated that it would rise to more than 25 percent. ‘‘They’re experimenting a lot with ad formats,’’ he said. ‘‘Not all of them will stick. It’s still in a somewhat experimental phase.’’
Despite the stock’s decline after the earnings report, it is still much recovered since last year’s slump. After Facebook’s fairy tale debut in the public markets last year at $38 a share, the stock plummeted as Wall Street soured on the company’s ability to grow profits as fast as it had wished.
But the company focused on its advertising business; rolled out a series of new products aimed at taking on some of its biggest rivals, including Google and Apple; and founder and chief executive Mark Zuckerberg took greater initiative to reassure investors it had their interests at heart. Facebook’s share price has steadily improved in the last few weeks, suggesting that the company’s charm offensive to investors is paying off.
Facebook’s biggest, long-term challenge remains how to profit from the enormous piles of personal data of its 1 billion users without alienating them or inviting the wrath of government regulators in the United States and abroad. Secondarily, it must figure out a way to profit abroad: The lion’s share of its revenues still come from North America and to a lesser extent, Europe.
In the last few months, Facebook has floated several trial balloons designed to please Wall Street and in particular, to persuade investors that it can thrive in the mobile era.
Jared Belsky, executive vice president of a digital marketing agency, 360i, said marketers were more optimistic about the Facebook platform than even a few months ago. ‘‘They have so much information to share on consumers, they are getting better at making data available,’’ he said. ‘‘They’re helping us target better, but to a point.’’