Facebook Shares Gain on Strong Advertising Revenue Growth
- By Sydnee Gatewood
Social media giant Facebook Inc. (NASDAQ:FB) reported strong first-quarter earnings after the closing bell on Wednesday.
For the three months ended March 31, the Menlo Park, California-based company, which operates Facebook, Messenger, Instagram, WhatsApp and Oculus, among other networks, saw net income increase 94% from last year to $9.5 billion. It posted earnings of $3.30 per share, crushing Refinitiv's estimates of $2.37.
Revenue grew 48% from the prior-year quarter to $26.17 billion, beating expectations of $23.67 billion. Facebook attributed the strong performance to a 30% year-over-year increase in the average price paid per ad and a 12% gain in the number of ads delivered. The company raked in $25.4 billion in advertising revenue, while its "Other" segment, consisting of sales of Oculus virtual reality headsets and Portal video-chatting devices, generated $732 million, an increase of 146% compared to a year ago.
As for average revenue per user, Facebook recorded a rate of $9.27, exceeding FactSet's forecast of $8.40 by a wide margin.
In regard its number of average users, an important industry metric, the social network failed to meet expectations. While the number of daily active users on the main Facebook platform increased 8% year over year to 1.88 billion, they were just shy of the 1.89 billion DAUs projected by FactSet. Similarly, the number of monthly active Facebook users grew 10% year over year to 2.85 billion, but were just short of the 2.86 billion MAUs that were anticipated. While the namesake app's user base in the U.S. and Canada remained flat for the second consecutive quarter at 195 million DAUs, its base in Europe grew to 309 million DAUs.
Across its family of apps, the company recorded 3.45 billion monthly users, up from 3.3 billion in the previous quarter.
In a statement, founder and CEO Mark Zuckerberg commented on the company's performance.
"We had a strong quarter as we helped people stay connected and businesses grow," he said. "We will continue to invest aggressively to deliver new and meaningful experiences for years to come, including in newer areas like augmented and virtual reality, commerce, and the creator economy."
Looking ahead, Facebook said it expects advertising revenue will be driven by price for the remainder of the year, with growth anticipated to remain stable or slightly accelerate in the second quarter compared with the slower growth seen last year as a result of the Covid-19 pandemic. It also projects revenue growth in the third and fourth quarters will significantly decelerate sequentially in comparison to the fast growth recorded last year due to the pandemic.
The social media giant is also bracing itself for "ad targeting headwinds" as a result of regulatory and platform challenges, including Apple Inc.'s (NASDAQ:AAPL) recent privacy changes in its iOS 14 update that will make it more difficult for the company to personalize advertisements for iPhone and iPad users.
Facebook is guiding for 2021 capital expenditures ranging from $19 billion to $21 billion, which is down from the prior outlook of $21 billion to $23 billion.
Shares of Facebook rose as much as 6% in after-hours trading following the announcement on Wednesday. The rally carried over into Thursday morning trading, sending shares up 5.79% to $324.89. GuruFocus estimates the stock has climbed nearly 19% year to date.
Disclosure: No positions.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.
