By Sarah E. Needleman

Facebook Inc. posted record revenue and profit in the fourth quarter as online holiday shopping and increased use of the company's platforms during the pandemic drove a surge in its ad business.

The social-media giant posted revenue of $28.07 billion, up from $21.08 billion in the final quarter of 2019. Facebook's profit rose 52% to $11.22 billion, or $3.88 a share. Both measures far exceeded analysts' projections.

The latest results are also likely to raise concerns among critics about the market power wielded by the parent company of Facebook, Instagram and WhatsApp.

Facebook cited recent European regulatory developments and anticipated ad targeting headwinds as serious threats.

The company is facing other challenges as well. Last month the Federal Trade Commission and 46 states filed antitrust lawsuits against Facebook, accusing it of buying and freezing out small startups to choke competition. Facebook has disputed claims presented in the lawsuits, describing them as revisionist history and defended its acquisitions as good for competition, advertisers and consumers.

The company has also been criticized for its decision to indefinitely ban former President Donald Trump from Facebook and Instagram after he made posts encouraging protests at the U.S. Capitol that led to a deadly riot. The tech giant recently referred the matter to an independent committee to determine whether Mr. Trump should be allowed back.

Facebook also said Wednesday that it was adding up to $25 billion to its existing stock buyback program. Shares in the company, which have lagged behind the Nasdaq Composite Index over the past three months, fell in extended trading Wednesday.

Analysts have been looking for signs that Facebook is making progress in efforts to expand its business beyond advertising in areas such as e-commerce and virtual reality.

Facebook's foray into e-commerce could yield big benefits in the long run, analysts say. Instagram Shopping and Reels along with Facebook Marketplace could be responsible for $3 billion of additional revenue for the company this year, according to a recent note from Morgan Stanley. The note cited a survey that found about a third of Americans use Shopping and Reels monthly while more than half use Marketplace.

Facebook is the first U.S. social-media company to report earnings for the most recent quarter. Snap Inc. and Twitter Inc., which also deactivated Mr. Trump's accounts, are scheduled to release their quarterly financial reports next month. With all three, analysts are looking for indications of whether banning the former president has reduced user engagement, though early data from analytics firms show no substantial changes in daily users or time spent on the platforms' websites and apps.

Facebook also continued to grow its user base in the closing months of 2020. It ended the third quarter with 1.82 billion daily users and 2.74 billion monthly users.

In the third quarter, Facebook's user numbers grew in every market except the U.S. and Canada, where daily and monthly users declined from the second quarter. The company had warned that users would likely spend less time on the platform as coronavirus restrictions were lifted.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

01-27-21 1648ET