Facebook Earnings Report Shows Continued Strength--Update
By Jeff Horwitz
Facebook Inc. posted record revenue in the third quarter as
strong digital-ad spending outweighed a high-profile ad boycott,
data-gathering restrictions and continued fallout from the
Revenue jumped 22% to $21.47 billion in the three months through
September, Facebook said Thursday. The company projects that
revenue will grow even faster during the fourth quarter, as the
holiday season bolsters ad spending.
Looking past 2020, the company sounded less sanguine. Facebook
finance chief David Wehner warned of a "significant amount of
uncertainty" in the coming year. While the pandemic has accelerated
the shift to online commerce in ways that will benefit Facebook
longer-term, he said, the company faces substantial regulatory
threats, as well as limitations on how it collects data from users
of Apple Inc.'s products.
Among the challenges to Facebook's business, Mr. Wehner singled
out an order by European regulators that would prohibit the
transfer of European users' data back to the U.S. The company is
appealing that decision.
Facebook's disagreement with Apple stems from the company's plan
to require Apple products users to opt-in to tracking by apps, a
step that would prevent apps from being able to reliably target ads
to their users.
"We need new regulation that allows for personalized and
relevant ads, while protecting people's data and privacy," Chief
Executive Mark Zuckerberg said on a conference call with analysts
Thursday. Excessive restrictions on the industry "could have a
meaningful negative effect on small businesses, and the economic
recovery, in 2021 and beyond," he said.
Facebook also faces increased antitrust scrutiny, with staffers
at the U.S. Federal Trade Commission recommending a lawsuit be
filed against the company. The FTC has spent more than a year
looking into complaints that Facebook has been using its powerful
market position to stifle competition, part of a broader effort by
U.S. antitrust authorities to examine the conduct of big technology
The third quarter began on a difficult note for Facebook, with a
boycott over its alleged failure to rein in hate speech on the
platform. Civil-rights groups including the National Association
for the Advancement of Colored People and the Anti-Defamation
League convinced major advertisers including Verizon Communications
Inc. and Unilever PLC to temporarily stop spending on Facebook's
platforms, a halt that the company has said could weigh on its
Despite those challenges, Facebook's earnings per share climbed
to $2.71 in the third quarter from $2.12 in the year-earlier
period, beating analysts' average projection of $1.90, according to
data from FactSet. Net income jumped 29% to $7.85 billion from
$6.09 billion, due in part to a $913 million one-time tax deduction
related to Facebook's R&D.
The company's operating margin stood at 37%, compared with 41% a
year earlier, as head count rose by 32% over the past year to
nearly 57,000. The number of people using Facebook products each
month -- which include Instagram, Messenger and WhatsApp --
increased to 3.21 billion from 2.82 billion a year ago, up 14%.
Following the third-quarter report, Facebook's stock initially
climbed in after-hours trading. The stock later reversed those
gains and dropped 2%. As of Thursday's close, Facebook shares had
risen by more than 33% this year, with pandemic-driven surges in
user growth and increased use of its platforms compensating for
both the advertiser boycott and lower spending by Covid
19-beleaguered advertisers in retail, travel and entertainment.
Facebook's total user numbers grew in every market except the
U.S., where the number of daily active users dropped to 255 million
from 256 million in the second quarter. The company had warned that
users would likely spend less time on the platform as coronavirus
restrictions were lifted.
The company's nonadvertising revenue fell 7% from a year earlier
to $249 million. The category includes Facebook's Oculus
virtual-reality business, which Mr. Wehner predicted would be
stronger in the fourth quarter due to sales of its VR headset.
Mr. Zuckerberg reiterated the company's intent to continue
investing in virtual-reality devices on the conference call.
While "still a few years out," Mr. Zuckerberg said that the
company is "laying the foundation for AR glasses, which will be the
Holy Grail of delivering a sense of presence" and have an
increasingly clear path to mainstream use.
U.S. political advertising likely also provided a boost, though
Chief Operating Officer Sheryl Sandberg said that in the third
quarter, political and government ads accounted for only a "low
single digit" percentage of revenue.
Write to Jeff Horwitz at Jeff.Horwitz@wsj.com
(END) Dow Jones Newswires
October 29, 2020 20:03 ET (00:03 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Historical Stock Chart
From Dec 2020 to Jan 2021
Historical Stock Chart
From Jan 2020 to Jan 2021