Facebook exceeds Q3 revenue expectations, but stock falls slightly due to expected headwinds
- The social media giant, which also owns Instagram and WhatsApp, said its daily active user base grew to 1.82 billion, up 12% year-on-year, versus 1.78 billion expected by analysts.
- It also reported a rare decline in daily active users for the US and Canada, down to 196 million from 198 million the previous quarter, but saw a jump in revenue-per-user for the region.
- Facebook's stock dipped slightly in after-hours trading amid discussion of expected headwinds.
Facebook announced better-than-expected revenue Thursday for its third-quarter
Facebook generated around $21.5 billion in revenue in Q3 2020, up 22% year-on-year. The positive revenue results show the company is starting to recover from the coronavirus-related economic downturn.
Although the coronavirus pandemic initially signaled a slowdown in digital advertising, the recovering economy has shown a reversed course in recent months for platforms like Facebook whose revenue is heavily based on ad spending.
Here are the key numbers, as well as what Wall Street was expecting. Estimates are based on Bloomberg consensus data.
- Revenue: $21.47 billion, up 22% year-on-year ($19.84 billion expected)
- Daily Active Users: 1.82 billion, up 12% year-on-year (1.78 billion expected)
- Monthly Active Users: 2.74 billion, up 12% year-on-year (2.70 billion expected)
- Earnings Per Share (EPS) GAAP: $2.71 ($1.91 expected)
Facebook's user base seems to have slowed growth in Q3, according to Facebook's numbers. The platform saw a rare decrease in its number of daily- and monthly- active users in the US and Canada between Q2 and Q3. Facebook says the slight decrease is due to "elevated" user numbers in Q2 due to the pandemic, and it expects to see a similar trend for the fourth quarter. However, the company also reported an increase in revenue-per-user for the region, up to $10,137 in Q3 from $9,291 in Q2.
Zuckerberg also talked about the company's plans around virtual and augmented reality, telling investors that Facebook is prioritizing getting 10 million total VR units into consumers' hands "in the next few years." At that point, he said, Facebook believes its VR business will be "self-sustaining" because the user base will be large enough that "it'll really economically make sense" for developers to prioritize making content for Facebook's Oculus platform over alternative gaming platforms.
Zuckerberg said "AR is going to be a little bit harder" due to the technological challenges building an AR device that's small enough to be "stylish or socially acceptable," but that Facebook is encouraged by creators and developers creating things like AR filters for its social media products.
Zuckerberg also fielded questions about the prospect of increased regulation of the tech industry, reiterating his previous stance of embracing certain, more modest regulations, while also taking a jab at other privacy-focused proposals in the EU and even Apple's policies.
Zuckerberg said a regulatory approach to content moderation that "requires companies to meet certain thresholds or show improvements basically aligns incentives in the right way to encourage companies to minimize the amount of that harmful content that people are seeing."
Facebook is just one of the major tech companies, alongside Amazon, Apple, and Alphabet, reporting their third-quarter earnings Thursday. Last week, Snap was among the first Silicon Valley players to reveal its revenue and user numbers for Q3, and its better-than-expected results may help to inspire optimism in the numbers to come down the line.
Nevertheless, Facebook is still grappling with criticism it's received over its handling of political content on the platform with less than a week before Election Day. Facebook did face off against a mass advertiser boycott over its policies in Q2 and Q3, but it's unclear whether the movement had a significant detrimental impact on the company's revenue.
Last quarter, Facebook revealed it officially crossed the benchmark of 3 billion monthly users across its family of apps, which includes Facebook, Instagram, WhatsApp, and Messenger.
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