Facebook Q2 revenue, profit top Wall St forecasts
But its total costs are up 82% from a year ago, shrinking profit margins
San Francisco
FACEBOOK reported second quarter revenue and profits on Wednesday that exceeded Wall Street's expectations.
At the same time, Facebook said that total costs rose 82 per cent from the same quarter a year ago, depressing its profit margins. The company's stock initially dropped as much as 5 per cent in extended trading after the earnings release, but later recovered.
Facebook, which owns the world's largest social network, as well as the Instagram photo-sharing service and the WhatsApp mobile messaging service, has been a juggernaut in the last two years, impressing investors with strong growth in advertising revenue.
In contrast to rivals such as Twitter, the Facebook social network has also managed to keep drawing in new users and getting them to come back frequently. The company said that 1.49 billion people logged on at least once a month during the quarter, up from 1.44 billion in the first quarter, and that 65 per cent of them checked in daily.
For the quarter, revenue rose 39 per cent to US$4.04 billion, up from US$2.91 billion a year ago. Wall Street analysts had expected the Silicon Valley company to post revenue of US$3.99 billion, according to S&P Capital IQ.
Net income was US$719 million, or 25 US cents a share, compared with US$791 million, or 30 US cents a share, a year ago. Excluding compensation-related expenses, the company reported a profit of 50 US cents a share. On that basis, analysts had expected Facebook to report a profit of 47 US cents a share.
"This was another strong quarter for our community," Mark Zuckerberg, Facebook's co-founder and chief executive, said in a statement. "Engagement across our family of apps keeps growing, and we remain focused on improving the quality of our services."
Facebook's results follow disappointing reports from two other social networking companies, Twitter and Yelp, on Tuesday evening. Both reported weak user growth and a muted outlook, and investors sold off their shares on Wednesday. Twitter stock fell more than 14 per cent, and Yelp plunged 25 per cent.
Facebook, which generates virtually all of its revenue from advertising, has systematically expanded the reach of its ads beyond the early banner units on its site. It now offers marketers the ability to target ads to mobile phone users inside other companies' apps, based on the demographic profiles it has compiled on its users.
Last month, the company said that it would open the Instagram photo feed to all advertisers. That is expected to bring in about US$600 million in revenue to Facebook this year, increasing to US$1.48 billion in 2016 and US$2.81 billion in 2017, according to new projections by eMarketer, a research firm.
Debra Aho Williamson, eMarketer's principal analyst on social media, said: "Brand advertisers have had extraordinary success on Instagram. Engagement has been high. Instagram has created this beautiful, well-lit environment for imagery for people to follow their passions and interests." NYT
