LinkedIn shares plummeted as much as 29% in after-hours trading after the professional networking site on Thursday released forecasts for the first quarter and all of 2016 that were well below analysts’ estimates.
LinkedIn said revenue for the first-quarter of 2016 would be about $820 million, lower than the $867 million analysts were forecasting, according to First Call. LinkedIn’s guidance for first quarter income, excluding certain expenses, was 55 cents per share, lower than analysts’ estimate of 74 cents. LinkedIn’s full-year revenue forecast of $3.6 billion to $3.65 billion also fell short of the $3.91 billion expected by analysts.
Investors dumped shares in reaction to the weak guidance, even though LinkedIn’s fourth quarter results beat revenue and earnings estimates.
Revenue in the fourth quarter, ending December 31, was $862 million, up 34% from $643.4 million in the same period a year earlier, topping the $857.6 million expected on average among analysts polled by Yahoo Finance. (See the full results here.)
The company posted a net loss of $8 million, or 6 cents a share, compared with a year-earlier profit of $3 million, or 2 cents a share. Excluding certain expenses, LinkedIn said it would have earned $126 million, or 94 cents a share, easily topping forecasts of 78 cents per share on that basis.
LinkedIn’s biggest source of revenue is its “talent-solutions business,” which mainly serves corporate recruiters. Revenue in that unit rose 45% from the same period a year earlier to $535 million.
The marketing-solutions unit, which sells advertising on LinkedIn properties, grew 20% from a year earlier, to $183 million.
Premium subscriptions sales rose 19% year-over-year to $144 million. LinkedIn reported 414 million users in the fourth quarter, up from 396 million users in the third quarter.
Globally, forecasting firm eMarketer expects the Mountain View, Calif.-based company to capture $1.13 billion in total ad revenue this year, or 3.4% of social network ad spending. In 2016, eMarketer predicts LinkedIn will have slower ad revenue growth than several major social networks. eMarketer expects LinkedIn to have ad revenue growth of 20.5% this year, slowing to 17.8% in 2017. By contrast, eMarketer says Twitters ad revenue will grow by 45% this year and that Facebook’s will grow by 31.5%.
Despite competition from job boards and other networking sites, LinkedIn continues to see solid growth in its business and user base globally, especially in China.
LinkedIn has also been working to improve the functionality of its consumer-facing products. Late last year, LinkedIn redesigned its flagship app to make the interface, especially messaging and search, simpler and less-cluttered. It also recently launched a new “Referrals” product, aimed at making it easier for employees to recommend their first-degree LinkedIn connections for open positions at their firms. And LinkedIn is building out original content on the site and finding new ways to connect users to skill-building tools such as its presentation tool, SlideShare. LinkedIn is also continuing to integrate education site Lynda.com into its platform. LinkedIn bought Lynda.com, an instructional video site, last year for $1.5 billion, its largest acquisition to date.
“Q4 was a strong quarter for LinkedIn, bringing to a close a successful year of growth and innovation against our long-term roadmap,” LinkedIn’s CEO Jeff Weiner said in a statement. “We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products.”