Facebook’s Earnings Are Strong In Spite of Regulatory Challenges

The company’s shares are up 43% year to date.

Shares of Facebook are trading a bit higher after the company released better-than-expected third-quarter earnings. The social media giant’s earnings, revenue, and user growth all topped Wall Street forecasts. And the company’s outlook for the fourth quarter was upbeat as well.  

Here is an overview of Facebook’s third-quarter earnings and what we can expect from the company going forward:

  • Earnings: $2.12, as opposed to $1.91 forecasted
  • Revenue: $17.65 billion, as opposed to $17.37 billion forecasted
  • Daily active users: 1.62 billion, as opposed to 1.61 forecasted

What Facebook did well during Q3

During the third quarter, Facebook’s revenue reached $17.65 billion, which is a 29% increase from a year earlier. The majority of the company’s earnings continue to come from its ad revenue. 

Advertising is becoming an increasingly competitive space, but Facebook is finding new opportunities through its Stories feature on both Facebook and Instagram. Mobile ad revenue currently accounts for 94% of the company’s total revenue. And the company’s average revenue per user increased by 19%. 

And Facebook continues to grow its daily and monthly active users. The company boasts 2.8 billion users across its entire family of apps. Facebook also continues to gain more users across both the U.S. and Europe. 

In many ways, it’s unsurprising that Facebook’s financials remain so strong. The biggest issue surrounding the company is its ongoing regulatory problems. However, these issues were largely sidestepped during the company’s earnings report. 

Instead, CEO Mark Zuckerberg released a statement saying simply, “We had a good quarter, and our community and business continue to grow.” 

What’s next for Facebook? 

At this point, it seems unlikely that the company’s regulatory issues will derail Facebook. Wall Street is bullish when it comes to the stock, and the company is considered a strong buy. The average price target for Facebook is $235.93, giving it a potential upside of more than 25%.

During the fourth quarter, management does expect the company’s revenue to decelerate slightly. However, it expects revenue growth to pick back up in 2020.