Investors shouldn’t be leaving Facebook just yet, Brent Thill, managing director of the internet research team at Jefferies, told CNBC on April 10, in the mist of the biggest crisis the social networking site was facing ever.
His words tuned out to be prophetic. Advertisers didn’t leave as users didn’t either, even as share prices fell 11% over the last month following the Cambridge Analytica data scandal.
In the days immediately after the scandal, the company lost more than $50 billion in market value.
“Clearly there’s an expense hit,” the analyst told CNBC before the start of Facebook CEO Mark Zuckerberg’s testimony before Congress.
But “a survey with our partners in the data world suggests that there’s really been no major deterioration to users,” Thill adding: “We surveyed users (last week), and they still say the dominant platform they use is Facebook with Instagram with 60% using the platform more than they did a year ago.”
You can also credit a stoic Zuckerberg testimony before Congress for this storm’s passing.
Here are the just published numbers.
Facebook Q1 result: Slap in the face of doubters
Facebook’s earnings and revenue soared in the first quarter, showing its advertising business continued to grow even as it responded to controversy over content and privacy on the social network, according to the Financial Times.
“Shares, which at the close of trading on Wednesday were 14% lower than before the Cambridge Analytica scandal broke on March 17, gained more than 7% following the results,” FT said.
The scandal revealed a massive leak of up to 87m users whose personal data was harvested by Cambridge Analytica.
“The company’s net income was almost $5bn in the quarter, up 63% yoy, earnings per share were 25% higher than analysts had forecast at $1.69, compared with average estimates of $1.35.’
It was advertisers who made it happen. Sales grew almost 50% to nearly $12bn, higher than expected $11.4bn, and outpacing a 39% rise in expenses from a year earlier.
Zuckerberg, said on Wednesday that the company faced “important challenges” but said the business was off to a “strong start” in 2018.
There are 2.2bn Facebook monthly active users, up 13% from a year earlier, and the company said it would increase the amount of its profits it is returning to shareholders.
It said it as adding $9bn to a share buyback program which was originally authorized at $6bn, according to FT.
“The company said in 2018 it expected to see expenses growing 50 to 60%, compared with the previous guidance of between 45 and 65%,” said FT.
Resilience in the face(book) of trouble
Facebook shares rose on Wednesday after the social network reported a surprisingly strong 63% rise in profit and an increase in users, said Reuters.
“After easily beating Wall Street expectations, shares traded up after the bell at $171, paring a month-long decline that began with Facebook’s disclosure in March reegarding Cambridge Analytica’s bad deed”, said Reuters.
“Everybody keeps talking about how bad things are for Facebook, but this earnings report to me is very positive, and reiterates that Facebook is fine, and they’ll get through this,” Daniel Morgan, senior portfolio manager at Synovus Trust Company told Reuters.
Facebook has demonstrated for several quarters how resilient its business model can be as long as users keep coming back to scroll through its News Feed and watch its videos, according to Reuters.
“It is spending to ensure users are not scared away by scandals,” Reuter said.
Much of Facebook’s ramp-up in spending is for safety and security, with efforts to root out fake accounts, scrub hate speech and take down violent videos.
Facebook said it ended Q1 with 27,742 employees, up 48% yoy.
Facebook and Alphabet Inc’s Google together dominate the internet ad business worldwide and Facebook is expected to take 18% of global digital ad revenue this year, compared with Google’s 31% percent, according to research firm eMarketer.
Twitter shares down
Twitter shares fell on Wednesday down 3.5% in afternoon trading in at $29.40 on the New York Stock Exchange after the social network said its revenue growth would slow this year and costs rise as it works to fight the spread of hate speech and allegations of election manipulation through its service, reported Reuters.
“That outlook overshadowed the second profitable quarter in the 12-year-old company’s history, which topped Wall Street estimates for revenue, profit and users,” said Reuters.
“Quarterly revenue jumped 21% from a year earlier, but Twitter said revenue growth for the remainder of 2018 will be similar to the slower rates of 2016, when annual revenue rose 14%.”
Twitter said its tally of daily active users grew 10% yoy, lower than the 12% to 14% percent maintained in recent quarters, a change that “has spooked investors,” Wedbush Securities analyst Michael Pachter told Reuters.
The social media sector is under pressure from lawmakers around the globe for inflaming political debates, allowing abusive language and failing to safeguard personal data, said Reuters.
Total revenue rose to $664.9 million, beating analysts’ expectations for $607.6 million, according to Thomson Reuters, and the company recorded a net profit of $61 million in Q1 2018 from a loss of $61.6 million, yoy.