Facebook earnings were strong, but CFO warns of slowing growth

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Facebook

stocks fell sharply late Wednesday after the company warned of slower growth for the remainder of the year. The cautious outlook comes even as digital advertising competitors have offered bullish forecasts for online advertising in the coming months.

Facebook shares (ticker: FB) were down 3.9% in the after-hours session. The action rose 1.5% in regular trading on Wednesday, closing at $ 373.28.

The social media platform reported second-quarter net income of $ 10.4 billion, which is $ 3.61 per share, compared to net income of $ 5.2 billion, or $ 1.80 per share a year ago. Revenue increased 56% to $ 29.1 billion.

Analysts had expected earnings of $ 3.02 per share on revenue of $ 27.9 billion.

It’s been a good quarter for our product and our business, ”CEO Mark Zuckerberg said on the earnings conference call on Wednesday. “There are now over 3.5 billion people actively using one or more of our services, and I am excited about our product roadmaps to come. “

CFO David Wehner said in the earnings release the company expects year-over-year revenue growth to slow “significantly” through the end of the year. , as the company’s second half of 2020 has seen rapid growth as the digital advertising industry recovers from associated Covid-19 slowdowns. Comparing to 2019, the company said growth would slow “modestly” in the second half of the year.

Typically, the second half of the year, especially the fourth quarter, is a strong one for online advertising companies because it includes the holiday shopping season. For the third quarter, analysts expect Facebook to earn $ 2.95 a share on $ 28.2 billion in revenue.

Wehner reiterated that the changes

Apple

tracking users in iOS apps will have a larger effect in the third quarter than in the period ending in June. During the conference call, Wehner said that while Facebook has enjoyed a strong digital advertising market, advertisers have struggled to adjust to the changes. Facebook is introducing new tools to help them do this, he said.

Facebook’s second-quarter ad revenue increased 56% to $ 28.6 billion from a year ago, boosted by an almost 50% increase in the average price per ad and a 6% increase the number of ads displayed on Facebook, according to Wehner. Growth in ads for the rest of the year will also be fueled by more expensive ads, the CFO said.

During the call for results, COO Sheryl Sandberg said the top performing advertising sectors were also those that performed well throughout the Covid-19 pandemic, such as e-commerce, retail and consumer goods. She added that travel is recovering.

“Our performance continues to be driven by the on-going digital transformation that accelerated during the pandemic and our long-term investments in tools and products to help businesses make change online,” said Sandberg.

Facebook said its monthly number of active users increased 7% from a year ago to 2.9 billion, roughly matching investor expectations. Daily active users were also up 7% from the same period last year, to 1.91 billion. Overall, across its various platforms, Facebook said that 3.51 billion people use one of its services per month, such as WhatsApp, Instagram, and Facebook itself.

Facebook’s Other segment revenue increased 36% to $ 497 million from a year ago. The “other” compartment includes the fast-selling Quest 2 virtual reality headset, which executives have touted as the first mainstream VR device. Analysts had forecast revenue of $ 690.5 million for the segment. On the conference call, Wehner said the second quarter included a revenue adjustment for returns related to a Quest 2 recall.

Facebook kept its forecast for total spending for 2021 at $ 70 billion to $ 73 billion and capital spending between $ 19 billion and $ 21 billion. Facebook said its workforce was up 21% from a year ago, to 63,404 at the end of the June quarter.