Facebook on Wednesday reported quarterly earnings and user growth stronger than most forecasts, but shares took a hit in after-market trade.

The leading online social network said net income rose seven per cent from a year ago to $7.3 billion, while revenue increased 25 per cent to $21 billion in the final three months of last year.

The number of people using Facebook monthly climbed eight per cent to 2.5 billion; for all its apps including Instagram, Messenger and WhatsApp, the figure was 2.89 billion.

Shares, however, quickly dropped more than seven per cent for reasons that were not immediately clear.

“We had a good quarter and a strong end to the year as our community and business continue to grow,” said Facebook chief executive Mark Zuckerberg.

Investors may be concerned by continuing increases in the amount of money Facebook spends as it pours resources into protecting privacy and preventing the platform from being used as a platform for hate speech, abuse, and disinformation.

Costs in the recently ended fourth quarter rose 34 per cent to $12.2 billion. Facebook ended the year with its employee ranks up 26 per cent to nearly 45,000.

Shares may have also been weighed down by worries about privacy regulations hobbling the company’s ability to effectively target its money-making ads.

Facebook chief financial officer Dave Wehner told analysts the company expects revenue growth to slow, in part due to regulations and “other ad-targeting related headwinds.”

Recent data privacy regulations in Europe and California as well as enhancements to browser or operating system software from Google and Apple, along with tools added by Facebook itself, are expected to limit the ability of the social network to use “signals” from third-party websites to more finely target ads, Wehner said.

Facebook posted gains in advertising, which represents the vast majority of its revenues, up 25 per cent at $20.7 billion in the quarter, and expanded its user base.

“Despite all of the concerns that have been swirling around the company

in the past two years, it beat expectations on revenue, and it demonstrated continued growth in its user base,” said eMarketer principal analyst Debra Aho Williamson.