Facebook’s second-quarter revenue tops estimates as advertising rebounds
Facebook Inc.’s second-quarter sales topped analysts’ highest estimates, rebounding from a pandemic-fueled disruption to digital advertising earlier in the year. The social media company’s shares surged in late trading.
Revenue jumped 11% to $18.7 billion, compared with the $17.3-billion average analyst projection. Facebook’s main social network logged 2.7 billion monthly active users in the period, according to a statement Thursday, compared with the 2.63-billion average estimate of analysts polled by Bloomberg.
Even as economic growth sputters, Facebook’s results show advertisers were willing to boost budgets in the second quarter after previously holding off. Facebook’s profit was $5.18 billion, or $1.80 a share, beating the $1.39 per-share average estimate.
In the current quarter, Facebook is confronting an advertiser boycott, after civil rights leaders called on major brands to protest the company’s handling of harmful content and misinformation. More than 1,000 advertisers, from Verizon Communications Inc. to Coca-Cola Co., pulled promotions from Facebook starting in July.
Still, because of Facebook’s vast reach and the rise in usage during the pandemic lockdown, its results have been able to withstand the broader economic slowdown better than many other large companies. Facebook said sales in the first three weeks of July were in line with the second quarter’s growth rate, taking into account “the impact from certain advertisers pausing spend on our platforms related to the current boycott.”
Facebook’s problems are “short-term and not structural, as FB has a good track record of managing advertiser concerns,” Mizuho Securities analyst James Lee wrote in a note to investors before the report.
The Menlo Park, Calif.-based company said that every month, 3.14 billion people use at least one of its products, including photo-sharing app Instagram and the WhatsApp messaging platform. Facebook shares soared about 8% in extended trading following the report, on track to reach a record, after closing at $234.50. The stock had gained 14% so far this year.
Researcher EMarketer attributed the positive quarterly results to Instagram. Facebook doesn’t break out revenue for Instagram, though people familiar with the matter have said the mobile app brings in more than a quarter of Facebook’s sales.
“Instagram has played a major role in Facebook’s ability to withstand the effects of the pandemic,” said EMarketer analyst Debra Aho Williamson. “Its success is helping to buoy Facebook as a whole.”
The company’s earnings report was delayed from Wednesday, the day of an antitrust subcommittee hearing in the U.S. House, where representatives for hours interrogated Chief Executive Officer Mark Zuckerberg, alongside other tech leaders. Armed with documents collected during the inquiry, the lawmakers asked Zuckerberg about Facebook’s acquisitions of WhatsApp and Instagram, which Zuckerberg admitted were purchased in part to remove competition.
Zuckerberg also told the Congressional panel that he was listening to the advertiser boycott, but was “not going to set our content policies because of advertisers. I believe that that would be the wrong thing to do.” Most of Facebook’s advertising revenue comes from small and medium-sized businesses that have few other options to reach customers.