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Facebook sees double-digit growth across the board, stock soars

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Facebook sees double-digit growth across the board, stock soars

Facebook Inc.delivered a strong beat to Street estimates after reporting a double-digit year-over-yeargrowth in its top and bottom lines and monthly active users.

The company continued on its path up with revenue clocking inat $5.38 billion, a 52% year-over-year increase from the $3.54 billion in the March2015 quarter, according to an April 27 earnings release. Revenue was largely drivenby the advertising revenue increasing 57% year over year to $5.2 billion for thequarter.

Facebook shares were up almost 9% in after-hours trading afterthe company reported its quarterly results. The social media giant's after-marketperformance is a bright spot amid other companies, such as Twitter Inc. and AppleInc., that saw sharp drops in their stock after reporting March quarternumbers.

Mobile continued to dominate the story for the social media giantas 82% of advertising revenue came from mobile compared to the 73% in the year-agoquarter. During a same-day earnings conference call, COO Sheryl Sandberg said mobilead revenue was $4.2 billion for the quarter.

"We're capitalizing on the shift to mobile, growing thenumber of marketers using our ad products and making our ads more relevant and effective,"Sandberg said.

Sandberg emphasized the three priorities laid out for the company— capitalizing on the shift to mobile, growing the number of marketers using adproducts and improving the effectiveness of ads — saw progress in the 2016 firstquarter. Users created three times more video now compared to a year ago, Sandbergsaid. Instagram users spent 40% more time watching video compared to the previoussix months.

While the company did not break out revenue figures for Instagram,executives noted that the photo-sharing platform had 200,000 advertisers alongsidethe 3 million advertisers on Facebook. CFO David Wehner said the company's ad loadis up compared to several years ago, with the quality and relevance of ads enablingthe company to show more without affecting user experience. He added that the growthof ad load is likely to be a less significant factor for overall revenue growthover time.

The company's income from operations saw a large leap for thequarter, clocking in at $2.01 billion compared to the $933 million in the March2015 period.

Net income attributable to class A and B common stockholdersfor the quarter saw a tremendous year-over-year growth, climbing to $1.51 billion,or 52 cents per share, up from $509 million, or 18 cents per share, in the year-agoquarter. On a non-GAAP adjusted basis for the quarter, net income was $2.23 billion,or 77 cents per share, up from $1.19 billion, or 42 cents per share, a year ago.

The S&P Global Market Intelligence first-quarter consensusEPS estimate was 62 cents on a normalized basis and 40 cents on a GAAP basis.

Monthly active users for the social network jumped to 1.65 billion— up 15% year over year — with mobile monthly active users clocking in at 1.51 billion— a 21%-year-over-year increase. Mobile daily active users were 989 million on averagefor March, an increase of 24% year over year. The number of daily active users alsosaw a 16% year-over-year increase, clocking in at 1.09 billion for the quarter.

On average, users around the world spent more than 50 minutesa day using Facebook, Instagram and Facebook Messenger, CEO Mark Zuckerberg saidduring the earnings call.

Though analysts asked if augmented reality and virtual realitywould have an impact on the 2016 revenue, executives were clear that the verticalswere not going to have a meaningful impact. Executives were still keen on the potentialof AR and VR as the future of social media, but were careful to emphasize the technologywas still in the early stages.

"I think there's a lot of hype around this and we're justfocused on building this to be very good over the long term," Zuckerberg said.

The forces driving the advertising revenue are expected to continueinto 2016 but the company will have a tough time comparing to 2015's acceleratedad growth, Wehner said. The payments and other fees segment will be lower than 2015levels, despite expected revenue from Oculus.

The 2016 GAAP expense growth rate is expected to range from 30%to 40%. Capital expenditures will be $4 billion to $4.5 billion for the full year2016 as the company expects to rapidly grow its business.

Also a part of the earnings release was news that Facebook'sboard of directors approved the creationof a Class C capital stock. The proposal aimed to create a capital structure inline with CEO Mark Zuckerberg's vision of the company, help him keep founder controlof the company and will be subject to approval at the June 20 annual stockholdermeeting.

"[T]his structure will allow for the preservation of thevoting structure that has served the Company well to date while allowing Mark tofund the initiative over the course of his lifetime," Wehner said. "Thepreservation of the multi-class capital structure would be generally predicatedon Mark's continuing to maintain an active leadership role at Facebook."