Facebook (FB  ) was down by as much as 7% after hours following fourth-quarter earnings that beat in terms of sales and profits but was hit on expenses and costs rising more than expected leading to narrower margins.

Inside the Numbers

Facebook reported $2.56 net income per share compared to estimates of $2.53 per share. Revenue was $21.08 billion which was slightly higher than analyst's estimates of $20.89 billion. It also reported 1.66 billion daily active users, 2.5 billion monthly active users, and average revenue of user of $8.52 against estimates of $8.32. Across its extended universe of apps which includes WhatsApp, Instagram, and Facebook Messenger, the company has 2.89 billion daily active users compared to 2.8 billion in the fourth quarter last year. The number of advertisers on the platform also increased to 8 million from 7 million.

Costs and expenses for 2019 came in at $46.7 billion which is an increase of 51% from the previous year. This resulted in operating margins dropping to 34% from 45% the previous year. Revenue growth was 24.7% compared to the previous year which marks the fourth straight quarter of revenue growth under 30%. This trend of falling margins and declining revenue growth is a signal that the company's earnings trajectory may have peaked. Besides the increase in expenses, another sign that Facebook may be entering a new phase is the announcement of a $10 billion share repurchase program.

Regulatory Risks Building

The upcoming election season has the potential to temporarily juice Facebook's revenue due to the influx in political advertising. However, the company will also be under scrutiny from both sides of the aisle. Liberals will be watching Facebook to see how it handles the "fake news" issue and other types of disinformation campaigns waged by candidates or even foreign proxies. Conservatives see any sort of interference as a violation of free speech and evidence of Silicon Valley's liberal bias.

In some ways, Facebook is in a no-win situation. From another perspective, Facebook has been so successful, and its monopoly and power is so entrenched that its most material threat is the federal government. Last year, the company was forced to settle with the FTC for $5 billion due to users' privacy violations. Facebook is also facing four different antitrust investigations which would be vigorously pursued even if the Democrats win the White House.