shares fell sharply lower in late trading Wednesday after the company warned of slowing growth for the remainder of the year. The cautious outlook comes even as digital advertising rivals have made a bullish forecast for online advertising in the coming months.
Facebook (ticker: FB) shares fell 3.9% in the after hours session. The stock 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, representing $3.61 per share, compared to net income of $5.2 billion, or $1.80 per share a year ago. Revenue rose 56% to $29.1 billion.
Analysts had expected earnings of $3.02 per share on revenue of $27.9 billion.
This was a good quarter for our product and business,” CEO Mark Zuckerberg said during the results conference call on Wednesday. “There are now more than 3.5 billion people actively using one or more of our services, and I I’m excited about our product roadmaps ahead.”
CFO David Wehner said in the earnings release that the company expects year-over-year revenue growth to slow “significantly” by the end of the year as the second half of 2020 grew rapidly as the digital advertising industry recovered from Covid-19-related slowdowns. . Based on a comparison with 2019, the company said growth would slow “modestly” in the second half.
Typically, the second half of the year, and especially the fourth quarter, are strong for online advertising companies, as they also include the Christmas shopping season. For the third quarter, analysts expect Facebook to earn $2.95 per share on $28.2 billion in revenue.
Wehner reiterated that changes
made for tracking users in iOS apps will have a greater impact in the third quarter than in the period ending June. In the conference call, Wehner said that while Facebook has benefited from a strong digital advertising market, advertisers are struggling to adapt to the changes. Facebook is introducing new tools to help them do that, he said.
According to Wehner, Facebook’s second-quarter ad revenue grew 56% to $28.6 billion year-on-year, fueled by a nearly 50% increase in the average price per ad and a 6% increase in the average price per ad. number of ads that Facebook ran. Ad growth for the rest of the year will also be driven by more expensive ads, the CFO said.
During the earnings call, Chief Operating Officer Sheryl Sandberg said the best-performing ad sectors were also those that did well during the Covid-19 pandemic, such as e-commerce, retail and consumer goods. She added that the travel was recovering.
“Our performance continues to be driven by the ongoing digital transformation that accelerated during the pandemic and our long-term investments in tools and products to help businesses make the transition online,” said Sandberg.
Facebook reported that its monthly active user base increased 7% from a year ago to 2.9 billion, roughly meeting investor expectations. Daily active users also increased by 7% from the same period a year ago, to 1.91 billion. Overall, Facebook said 3.51 billion people use one of its services per month, such as WhatsApp, Instagram and Facebook itself.
Revenue from Facebook’s other segment rose 36% to $497 million from a year ago. The “other” bucket includes the fast-selling virtual reality headset Quest 2, which executives have touted as the first mainstream VR device. Analysts had forecast revenue of $690.5 million for the segment. In the conference call, Wehner said the second quarter included a revenue adjustment for returns related to a Quest 2 . recall.
Facebook maintained its forecast for 2021 total spending of $70 billion to $73 billion and capital spending between $19 billion and $21 billion. Facebook said its headcount was up 21% from a year ago, to 63,404 at the end of the June quarter.