What scandal? Facebook's profits soar, user numbers rise

SAN FRANCISCO -- The recent data privacy scandal shows no signs of slowing Facebook, which said Wednesday that profits, advertising revenues and membership were still showing healthy gains.

The Menlo Park social network reported net income for the first quarter ended March 31 at $4.99 billion, up about 63 percent from a year ago. Revenue, most of it from advertising, soared nearly 50 percent.

Although last month's Cambridge Analytica scandal prompted some Facebook users to call for members to delete their accounts, the number of daily active users around the world rose 13 percent to 1.45 billion, the company said.

Facebook's stock rose nearly 5 percent in after-hours trading on Wednesday, following the earnings report.

``Despite facing important challenges, our community and business are off to a strong start in 2018,'' CEO Mark Zuckerberg said in a statement. ``We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.''

Zuckerberg spent two days this month being grilled by members of Congress over how Cambridge Analytica, a British political consulting firm that worked on Donald Trump's presidential campaign, improperly obtained data from the profiles of 87 million Facebook users.

In a call with investors that followed the release of the earnings report, Zuckerberg called the hearings ``an important moment for the company to hear the feedback and to show what we are doing.''

GBH Insights analyst Daniel Ives called Facebook's earnings report a ``pivotal barometer.'' His company's researchers said 15 percent of Facebook users they polled had decreased their use of the social network in light of the Cambridge Analytica scandal.

``At first look, we would characterize 1Q results as a relief and (as) a sign that so far the damage from Cambridge appears contained, although this will be a long three-six months ahead to steer through this storm,'' Ives said in a research report.

The Cambridge Analytica crisis happened too late in the first quarter to have much effect on the company's new advertising revenue figures, said Debra Aho Williamson, principal analyst with the research firm eMarketer. Only about four major advertisers ``paused'' their spending on Facebook, ``and they mainly did it for public relations value and not for any extended period of time,'' she said.

Other analysts have also questioned whether the ``#deletefacebook'' movement would have an effect on the company's bottom line.

``We don't know if people are going to follow up on all of these revelations of their privacy, or lack thereof, on Facebook by reducing their use of of it or by sharing less or even deleting their profiles,'' Williamson said. ``I don't think we're going to see the result of any of that until the end of quarter two when Facebook next reports its earnings.''

A user survey by Baird Equity Research in March suggested a ``slight negative downtick'' in monthly and daily active users in the U.S., according to Colin Sebastian, a senior research analyst for the firm. However, researchers still expected that drop to have ``minimal impact'' on advertising revenues.

Even if Facebook weathers the Cambridge Analytica storm without harsh regulation in the United States, the company still faces challenges worldwide. Facebook executives said that changes needed to comply with Europe's General Data Protection Regulation, which takes effect May 25, could potentially reduce advertising revenues for all online companies. However, they anticipated minimal impact to Facebook's revenues and membership numbers in the second quarter.

``We'll just have to watch how that plays out over time,'' Chief Financial Officer Dave Wehner said Wednesday during the earnings call.