Facebook made more money in Q2 and promises to spend less. Shares jump.
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Facebook made more money in Q2 and promises to spend less. Shares jump.

Social network market leader Facebook crushed analysts’ expectations this week when it reported results that beat on every metric. As though this wasn’t good enough news on its own, the company also said that its 2017 expenses would come in at less than originally forecast – 40% to 45% instead of 40% to 50%. Predictably, the company’s share price jumped, extending returns in what has already been a tremendously positive year.

Facebook’s share price has risen by 50% so far in 2017

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SOURCE: Yahoo Finance

Facebook reported earnings per share of $1.32 against expectations of $1.13. It also brought in $9.32 billion in revenue for the quarter against predictions of $9.2 billion. The company’s mobile advertising business was a clear outperformer again, delivering $8 billion in revenue against estimates of $7.68 billion. This is an incredible 53% jump, year over year, and represents the bulk of Facebook’s earning power.

While it made more money, it also spent less – Facebook’s capital expenditures over the quarter were $1.44 billion versus an expected $1.73 billion. All this was made possible by its higher than expected number of monthly users: 2.01 billion against consensus estimates of 1.98 billion.

The company has been aggressively adding video and display ads to its mobile app, capitalizing on the trend towards smartphone use, and is expected to add TV-like programming soon. Facebook’s chief operating officer, Sheryl Sandberg, said: “we are making some early investments to create episodic content. Out goal is to be a platform for content creators. We remain very solidly in investment mode.”

Disclosure

Dominion holds Facebook in its Global Trends Ecommerce Fund.


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