Facebook Q3 Earnings Beat EPS Predictions, but Failed Analyst Expectations on Revenue, Daily and Monthly Active Users

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Oct 30
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Social media giant Facebook (NASDAQ:FB) announced its Q3 2018 financial results and despite exceeding analyst expectations when it comes to earnings per share, the company’s results fell short when it came to revenue, daily active user and monthly active user estimates. However, Facebook’s CEO Mark Zuckerberg is optimistic about the future, with the company telling investors to expect increased expenses in 2019.

“I want you to know that looking out beyond 2019, I know that we need to make sure our costs and revenue are better matched over time, and that’s something that I am focused on as well.”

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Going over the earnings, Facebook (NASDAQ:FB) beat EPS estimates with a figure of $1.76 against earnings per share of $1.47. Unfortunately, the company generated $13.73 billion in revenue as opposed to estimates of $13.78 billion, according to Refinitiv. According to FactSet and StreetAccount, Facebook (NASDAQ:FB) garnered 1.49 billion daily active users; the number is less than the 1.51 billion estimated, but only just. Same goes for monthly active users, where Facebook (NASDAQ:FB) claims it has 2.27 billion and it failed estimates of 2.29 billion.

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During the earnings call, CEO Mark Zuckerberg stated that the company plans to invest significantly in 2019 as it focuses on building out new products such as Facebook Watch, IGTV, and Facebook Marketplace, while improving cybersecurity. According to Facebook (NASDAQ:FB) CFO David Wehner, 2019 total expenses for 2019 are expected to reach 40 to 50 percent higher compared to 2018’s.

Analysts have stated that the News Feed section will not sustain Facebook (NASDAQ:FB) forever, which can drive investors away. Facebook’s year-over-year revenue growth has slowed from 59 percent in Q3 2016, to 49 percent a year ago, to 33 percent now. In messaging, Zuckerberg says that more photos and links are shared privately than through Feeds. Mostly due to the success of WhatsApp, he sees Facebook’s position as strong, but that is also possible as other countries prefer Android devices. In the U.S., the majority of the market is taken up by iPhones, and users prefer using iMessage.

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To cover up losses, Facebook (NASDAQ:FB) is aggressively monetizing Messenger through inbox ads, and it is now selling enterprise tools to brands on both Facebook and WhatsApp that let them pay to ping users. However, if these ads end up becoming too intrusive and start derailing the user experience, users might end up looking for an alternative.

Across Facebook’s other products, Zuckerberg states that 800 million people now use Marketplace, and its Jobs feature has helped people find 1 million jobs. How the social media giant is expected to make other streams of revenue to diversify its earnings in the wake of competition, looks like we will find out in the future.

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