A lot of big tech companies will be reporting their Q3 earnings this week. Among others, investors are paying extra close attention to social media companies, which are expected to report worse-than-expected results thanks to Apple’s (NYSE: AAPL) new privacy policy on its iPhone. Facebook (NYSE: FB) reported its results on Monday, which were indeed lower than expected, although they could have been much worse.
Facebook’s ad sales, the primary revenue driver for the company, saw a decrease in growth precisely after Apple required apps to ask users whether they were willing to be tracked. Since most users obviously answered no, it made it harder for advertisers to get accurate info on how their ads performed. However, some companies have fared better following this change than others.
Total earnings came in at $3.22 per share, or around $29.01 billion this quarter. The latter figure is slightly lower than the $29.6 billion expected by analysts. Otherwise, user numbers stayed almost exactly the same compared to what most shareholders were expecting. Facebook also added that it would be buying back over $50 billion in stock.
When asked about the controversies surrounding Facebook right now, especially regarding the new testimonies of various whistleblowers, the company’s management made a number of different comments on the topic.
“I’m proud of our record navigating the complex trade-offs involved in operating services at global scale,” said Mark Zuckerberg in regards to the company’s recent criticism. “It makes a good sound bite to say that we don’t solve these impossible trade-offs because we’re just focused on making money, but the reality is these questions are not primarily about our business, but about balancing different difficult social values.”
Investors have been worried that Facebook, Twitter, and other social media companies will suffer thanks to Apple’s new policies. We’ve also seen that happen with Snapchats owner, Snap (NASDAQ: SNAP), which plunged after its revenue figures tanked. However, it seems the larger social media firms might be able to deal with this change relatively unscathed.
Shares of Facebook were up around 1.3% following the news, with pre-market trading seeing another 2.4% in gains. Overall, the news could have been much worse. We’ll have to see how Twitter does later this week when it posts its own results. Google will also be reporting its results later this week as well.
Facebook Company Profile
Facebook is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Facebook operates at a 30%-plus margin. – Warrior Trading News