Facebook Post Strong Earnings in Q1’20, Exceeds Analysts Projections

Its earnings season and Facebook has some relatively good news on that for the investors. It has impressively beaten Wall Street expectations on revenue and earning per share (EPS). Facebook ad revenue grew by 17% Y-o-Y despite the instability in the digital ad market due to COVID-19.

Why does it matter?

Interestingly, Facebook was able to beat top and bottom-line revenue expectations amid the coronavirus crisis showing how its business is strong and growing. However, the company didn’t provide specific revenue guidance for Q2 due to the ongoing uncertainty but offered a snapshot on the revenues of upcoming quarters.

• Meanwhile, Facebook said that the current rise in engagement will continue but the usage will come down once the stay-at-home orders are lifted. 
• The digital advertising industry has taken a hard hit due to shelter-at-home orders globally. Facebook said in a  statement, “We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020.”

 

Let’s talk numbers

• Earning per share (EPS): $1.71 vs. $1.75 per share forecast by Refinitiv
• Revenue: $17.74 billion vs. $17.41 billion forecast by Refinitiv
• Daily active users (DAUs): 1.73 billion

Image Credit: Facebook

• Monthly active users (MAUs): 2.6 billion
• Family Monthly Active people (MAP): 2.99 billion monthly users across its family of apps. This metric helps to measure Facebook’s total user base across its main app, Instagram, Messenger, and WhatsApp.
• The average revenue per user (ARPU): $6.95
• Other revenue: $297 million which is driven by sales of VR headset ‘Oculus.’
• Cash and cash equivalents: $60.29 billion

 

What lies ahead?

• Facebook is the third internet company that posted strong Q1 results after Snapchat and Google despite the hindrances in the digital ad market. This shows big internet companies will keep dominating the advertising ecosystem due to the pandemic.  
• CCS Insight chief operating officer Martin Garner believes the impact of the virus will lead companies to use digital services from advertising to collaboration. 

“………..Although Google and Facebook will take a hit from Covid-19, we expect them to be leading indicators of recovery, as digital advertising and other services show early growth in economies getting back to normal.”