Facebook Q3: Beats on earnings but disappoints on revenue

Like Google just last week, rival Facebook had better-than-expected earnings but revenues that fell below expectations.

Ad revenues up 33% YoY. Facebook announced third quarter revenues of $13.7 billion, up roughly 33 percent but slightly below Wall Street estimates. Most other metrics were positive, including earnings per share of $1.76 that came in well above expectations of $1.47.

The company reported net income of $5.1 billion.

The majority of Facebook’s revenue was generated by advertising. In Q3 ad revenues were $13.5 billion, which represented 33 percent growth year over year. Mobile ad revenue contributed 92 percent of that total, or 12.5 billion. In Q3 2017 mobile contributed about 88 percent of total ad revenue.

DAUs up 9% YoY, below expectations. Globally, daily active users (DAUs) were up 9 percent to 1.49 billion. Monthly active users totaled 2.27 billion, up 10 percent. These numbers were below expectations and disappointed some investors. And while revenue was up in North America and Canada, usage was basically flat — as it has been for the past several quarters.

Facebook said that 66 percent of its monthly active users visit the site daily. The company also pointed to “more than 2.6 billion” people who use one of Facebook’s properties (Facebook, WhatsApp, Instagram, Messenger) at least monthly and more than 2 billion that do so daily.

The company also reported cash or cash equivalents of roughly $41.2 billion. Facebook said it now had 33,606 employees, representing a 45 percent increase compared to a year ago.

Why it matters to marketers. Facebook’s earnings are set against the backdrop of a number of surveys showing declines in user trust and engagement on the platform in the wake of various controversies and data scandals, such as Cambridge Analytica. Revenues below analyst estimates may signal advertiser migration to Instagram where ads remain cheaper, more than a significant advertiser retreat from the platform.

The company is also focused on pushing Stories ads as the new growth opportunity. CEO Mark Zuckerberg said in the earnings call that those efforts have been slower than he’d hoped.