Facebook Posts Record $29 Billion In Second-Quarter Revenue—Blowing Past Wall Street Expectations

Topline

Facebook reported record second-quarter results Wednesday afternoon that shattered analyst expectations, but shares of the tech giant fell immediately after the announcement amid concerns the company’s growth is no longer up to par with smaller rivals Twitter and Snap following their staggering results last week.

Key Facts

Shortly after the market’s closing bell, Menlo Park, Calif.-based Facebook reported second-quarter revenue of $29 billion, up 56% from the same period last year and even beating out average analyst expectations calling for $27.8 billion.

Net income, meanwhile, more than doubled to $3.61 per share, or roughly $10.4 billion, from $5.2 billion a year ago; analysts estimated earnings would be about $3.01 per share.

The social network also hit a record 2.9 billion monthly active users, up 7% year over year.

In light of its “increasingly strong growth,” the company, whose suite of offerings include Instagram and its Messenger service, said revenue growth will “decelerate significantly” in the next two quarters, while it expects costs will remain the same.

Facebook shares fell 4% to $358 in post-market trading immediately after the release; the stock has climbed about 38% this year—more than double the tech-heavy Nasdaq’s 16% increase.

What To Watch For

Facebook’s second-quarter earnings call is at 5 p.m. EDT Wednesday. 

Crucial Quote

“Facebook’s bar was too high,” Vital Knowledge Media Founder Adam Crisafulli said in a note after the earnings release, adding that the company’s stock “is suffering from bad timing,” having followed blow-out reports from Twitter and Snap, as well as tech giants Microsoft and Apple. “If Facebook kicked off the season with numbers like this, it would have been largely okay, although the magnitude of upside certainly isn’t as large as it was at its peers,” he added.

Tangent

Last week, smaller social media rivals Snap and Twitter stunned Wall Street with earnings that blew past expectations, posting revenue growth of 116% and 74%, respectively. Both sets of results point to a stronger-than-expected advertising recovery for online media—something Bank of America analysts cautioned Monday could weigh on Facebook stock after earnings if the company doesn’t live up to its peers.

Key Background

Founded in 2004 by a group of Harvard College classmates including billionaires Mark Zuckerberg and Dustin Moskovitz, Facebook is now the fifth-largest U.S. company by market cap, worth nearly $1.1 trillion. More than 95% of its  revenue comes from advertising, and about 50% of sales are in the U.S. and Canada. Though Bank of America expects the stock could soar another 20% in the next three years, its analysts caution the biggest risks to watch for include declines in user activity, privacy issues, big-tech regulation and any adverse impact on advertising prices.

Big Number

$386.50. That’s how high analysts think Facebook shares can go over the next year, according to Bloomberg data, giving the stock about 4% upside to current prices.

Further Reading

Why Facebook Now Plans To Pay $1 Billion To Influencers Through 2022 (Forbes)

Facebook Q2 Earnings: Can FB Retain Ad Revenue Growth Amid Competition And Pressure From Apple? (Forbes)

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