LinkedIn Corp (LNKD) Q4 2015 Earnings: Rising Costs Drag Down Profits, Forecasts

SAN FRANCISCO — LinkedIn shares plummeted more than 25 percent in after-hours trading Thursday following the release of the company's fourth-quarter earnings, in which the professional networking site outlined a worse-than-expected forecast entering 2016 and reported net income down from a year prior due to growing expenses.

The Mountain View, California, company posted revenue of $862 million, up 34 percent year to year from $643 million for the same period in 2014. The company also posted earnings of 94 cents per share, which are up 51.6 percent from 62 cents per share a year ago. Those figures beat analysts' estimates' of $857.59 million in revenue with earnings per share of 78 cents.

But while revenue was up, profit was down. For the final three months of 2015, LinkedIn posted a net income of $126 million, down 50 percent from the $254 million net income it reported a year ago. Revenue for all of LinkedIn's major products was up year over year, so the drop in profit came as a result of growing costs.

LinkedIn saw its costs and expenses grow more than 39 percent from $629.3 million in the fourth quarter of 2014 to $877.8 in the most recent period.

“Like Facebook, Twitter and other social technology companies, LinkedIn is investing in its growth and providing future value to its user base," said James Gellert, CEO of Rapid Ratings, a research and analytics firm. Gellert said LinkedIn is positioned to be stable. "This is another example of how companies in their early development are challenged by the quarterly assessment under the public market microscope.”

Worse yet was the professional social network's outlook for 2016. The company's forecast for the first quarter was $820 million in revenue, which would represent a 28.5 percent year-to-year increase from the $638 million LinkedIn posted in the first quarter of 2015. But that came in far short of analysts' expectations, which had pegged their estimates at $866.86 million in revenue. LinkedIn projected 2016 first-quarter earnings per share of 55 cents, which would be down 3.5 percent from a year prior and falls short of the 74 cents per share analysts were expecting.

“Q4 was a strong quarter for LinkedIn, bringing to a close a successful year of growth and innovation against our long-term roadmap,” said Jeff Weiner, CEO of LinkedIn, in a statement. “We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products.”

"Outside Facebook, the entire social media sector is under severe pressure and has been for the past year," said Adam Sarhan, CEO of Sarhan Capital. "LinkedIn knows the global economy is slowing considerably, and that bodes poorly for hiring and their bottom line."