Facebook Rolling Up After Earnings

Facebook earnings released, up despite the settlements

Facebook has beaten any expectation rolling up on the earnings of this 2Q.

The company seemed to be facing dire consequences as months of regulatory drama came to a head all at once this week. Facebook was fined of $5 bilion U.S. Federal Trade Commission settlement on privacy, and a separate $100 million accord with the Securities and Exchange Commission related to the same issue.

But none of it has affected the company’s ability to reel in new users or advertisers. In the second quarter, Facebook topped analysts’ sales estimates and delivered solid user growth, so that he has greater clarity about how to operate the world’s largest social-media company.

“If that doesn’t get put in place, then frustration with the industry will continue to grow,” he said on a conference call.

For more than a year, Facebook has been in constant crisis over leaks of users’ data, the spread of violent or false content on its apps, and scrutiny of its power to influence public discourse. While growth at the main Facebook app has slowed, the company is still adding users quickly on other properties, and has embarked on a project to weave its platforms together, creating an even bigger network. A total of 2.7 billion people use at least one Facebook-owned app — Facebook, Instagram, WhatsApp or Messenger — every month.

“Despite horrific headlines for almost two years, usage trends remain strong,” said Benjamin Schachter, an analyst at Macquarie, in a note to investors. As long as the users are still coming, “we think advertisers will continue to show up.”

On the call Wednesday, Chief Financial Officer David Wehner gave three reasons for the expected slowdown in sales growth. First, there may yet be more pressure from new global regulations, such as Europe’s new rules governing data collection. Second, there may be changes to privacy rules governed by Apple Inc.’s iOS and Google’s Android mobile operating systems, where Facebook offers its app. Recently, Apple banned one of Facebook’s data-gathering apps. And third, Facebook is making its own privacy tweaks, Wehner said, which could rein in growth. For example, Facebook is expected to release a “Clear History” feature later this year, which could hamper ad targeting if Facebook can’t link users’ browsing histories to their profiles.

Including the costs set aside for the settlements and a tax-related charge, Facebook said quarterly net income was $2.62 billion, or 91 cents a share. Excluding the items, the company said profit was $1.99 a share, exceeding the $1.88 per-share average analyst estimate. A year earlier, Facebook posted earnings of $5.11 billion, or $1.74 a share, on sales of $13.2 billion.



Source: Bloomberg




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