Facebook Earnings Beat Expectations
So will this result from Facebook be enough to steady the fragile US share markets?
Alphabet’s record result on Monday failed to have a solidifying impact, Facebook, while easily topping market forecasts, will help, but investors are now looking to Apple next Tuesday to perform the trick and halt the growing rot in the mega techs.
Facebook topped market forecasts for revenue and earnings in the three months to March 31, joining rival Google in doing much better than anyone had thought.
There was no early impact from the data-privacy scandal involving Cambridge Analytica which erupted in mid-March and not enough to knock the record breaking performance.
Face book reported a $US4.99 billion in quarterly profit on sales of $11.97 billion, easily beating market estimates of $US4.01 billion and revenue of $US11.41 billion. Revenue was up 49% year on year, while earnings leapt 63%.
Facebook shares jumped more than 5% in after hours trading after ending the regular session flat at $US159 ahead of the post close release of the results.
Up to Wednesday’s close Facebook shares has lost 9.5% this year, much worse than the 1.5% slide in the S&P 500 index, the key market performance measure.
The Dow and S&P ended the day with small gains (Nasdaq suffered a small loss) as results from Boeing and several other companies steadied investor nerves after the key US 10 year bond yield climbed over 3% and ended at 3.029%.
That’s the highest close in more than four years and will continue to worry the markets, especially if the climb continues into next week.
Of Facebook’s overall revenue, mobile sales made up 91%, with the remainder split between desktop ads and Facebook’s other businesses.
Daily active users and monthly active users rose to 1.45 billion and 2.2 billion respectively. Operating costs were lower than forecast by analysts but CEO Mark Zuckerberg warned they will continue to eat into Facebook’s profits as it adds 20,000 workers to address security and privacy concerns in the wake of the Cambridge Analytica scandal and the rise in scepticism abut the company.
According to the earnings release, Facebook increased its workforce by a massive 48% to 27,742, compared with the year-earlier quarter. A further rise is expected over the rest of this year.
The Facebook performance was much stronger than Alphabet/Google’s in the same three month period. Alphabet/Google has just revealed one of the strongest quarterly growth figures for ad revenues for years - they soared more than 24% from the first quarter of 2017.
The company said ad revenues totalled $US26.642 billion in the three months to March 31, up $US5.232 billion from $US21.411 billion in the same quarter of 2017.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.