Facebook Scores Really Big In Q3 Earnings

By klaireaustria

Nov 03, 2016 05:55 AM EDT

Facebook is really stable and had a wildly successful Q3, earning $7.01 billion in revenue and $1.09 EPS. That's off of from 1.79 billion monthly users, up 16% year-over-year, and growing 4.67% this quarter, speeding up from 3.63% last quarter. Daily active users rose to 1.18 from 1.13 billion last quarter, and up 17% year-over-year. Facebook now has 1.66 billion mobile MAUs up 5.7% from 1.57 billion in Q2, and it's hit a new billion-user milestone as it reached 1.055 billion mobile-only users.

Facebook destroyed analyst estimates, which were $6.92 billion in revenue and $0.97 EPS. Still, Facebook's share price is down because it says it's hitting maximum ad load, which will reduce revenue growth.

Mark Zuckerberg summed up the progress succinctly, writing "We had another good quarter." The company has beat earnings every quarter since it IPO'd, except for one quarter of mixed results due to foreign currency fluctuations that also hit many other tech companies.

Mobile now makes up 84% of Facebook's ad revenue, the same as last quarter and up from 78% in Q3 2015. That means Facebook earned $5.7 billion of its total $6.8 billion in ad revenue on mobile ads alone.

Revenue was up a wopping 59% year-over-year, which compares favorably to Twitter, which saw just 10% year-over-year revenue growth.

Though Facebook is now 12.5 years old, it's still remarkably sticky, with 66% of its monthly actives using it daily, flat compared to 66% last quarter. That means despite all the worries about Snapchat, people aren't using it fewer days per month.

[Update 3:15pm PT: During the earnings call, Mark Zuckerberg emphasized Facebook's focus on video and allowing people to share via the camera. He announced that 40 million people have now connected to the web thanks to Internet.org, up from 15 million a year ago. The company also revealed that its effort to thwart desktop ad blockers has led to an 18% increase in desktop ad revenue.

Despite the successful quarter, Facebook share price sank about 7.6% in after-hours trading to around $117.40, versus an all-time high of $133.50 late last month. The cause was comments from CFO David Wehner, who reiterated his last quarter statement that Facebook is approaching maximum ad load, so it won't be able to increase the number of ads it shows any more. Those increases, along with user count and engagement growth, were big drivers of Facebook's total revenue growth. Because of that, Wehner says "we expect to see ad revenue growth rates come down meaningfully." Meanwhile Facebook plans to make large investments in hiring and data centers next year.]

While Facebook's business continues to chug along, the company had a tumultuous quarter in the press. It dealt with allegations of censorship of graphic but newsworthy images like the The Terror Of War photo that depicts a nude Vietnamese child, though Facebook now vows to allow more of this kind of content. The company continues to refuse the label of a "media company" despite its algorithms and content policies having a huge impact on how over a billion people get their news.

But Facebook's investment and focus on video seems to be showing strong returns. Viewership is massive, and it's allowing Facebook to slip more and more high-priced video ads into the feed. That dove Facebook's 9.1% average revenue per user in the US and Canada this quarter. While video might have seemed like a long-shot considering YouTube's dominance, the bet has paid off big time.

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