Facebook (FB) reported second-quarter earnings after market close on Wednesday, with the recovery across the internet advertising industry helping lift the social media company's results beyond Wall Street's expectations.
However, Facebook flagged an expected slowdown in revenue growth, and said that decreased ad targeting abilities following an Apple iOS update would negatively impact results going forward. Shares slid more than 3.5% in late trading.
Here were the main metrics from Facebook's report, compared to consensus estimates compiled by Bloomberg:
Revenue: $29.08 billion vs. $27.86 billion expected and $18.69 billion Y/Y
Earnings per share: $3.61 vs. $3.02 expected
That top-line growth came even as user growth decelerated for the massive platform, with monthly active users across all Facebook properties including Instagram and WhatsApp increasing 12% over last year to 3.51 billion. That compares to a 13.8% growth rate in the same quarter last year, and a 15.4% rate during the first quarter.in-person activities returned and vied for attention. Their sales and earnings beats suggested monetization of these users was also improving.
But with more than 10 million active advertisers, Facebook remains a reigning leader in the online advertising space, and it has grown strongly over the course of the pandemic even as many businesses trimmed their marketing budgets. Revenue for the second quarter grew nearly 56% over last year to nearly over $29 billion, far exceeding estimates.
And that top-line growth came even as user growth decelerated for the massive platform, with monthly active users across all Facebook properties including Instagram and WhatsApp increasing 12% over last year to 3.51 billion. This compares to a 13.8% growth rate in the same quarter last year, and a 15.4% rate during the first quarter.
Facebook also highlighted its expectations for a further growth slowdown later this year.
"In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth," the company said in its earnings statement. "When viewing growth on a two-year basis to exclude the impacts from lapping the COVID-19 recovery, we expect year-over-two-year total revenue growth to decelerate modestly in the second half of 2021 compared to the second quarter growth rate."
But one key risk Facebook flagged was around Apple's recent ID for Advertisers (IDFA) software update. This update allows users to opt out of tracking in apps on iOS devices — a move which Facebook has suggested would decrease developers' ability to monetize ads. Users have implemented the update over the past several months, and the company suggested the updates would begin to impact the company more meaningfully in the second half of the year.
"We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter," Facebook said in its earnings statement.
Updates on Facebook's commerce ambitions were also set to be closely monitored, as the company continues to invest heavily in building out its payments and shopping experiences across each of its core Facebook, Instagram and WhatsApp platforms. Facebook CEO Mark Zuckerberg acknowledged during the prior quarter's earnings call that commerce offerings like Facebook Marketplace and Instagram Shopping had become increasingly important as the pandemic accelerated the consumer shift to making purchases online, and said last quarter that building out a full-featured commerce platform across all the company's services will be "a multiyear journey."
"Shopping remains a big focus as FB's ability to improve ad conversion and monetize organic posts with shopping capabilities could help offset tougher 2H21 revenue comps," Bank of America analyst Justin Post said in a note. "Longer term, messaging remains a potentially large revenue drive and Facebook has seemingly been more constructive on AR/VR [augmented reality/virtual reality] traction, plus time spent on Instagram and IG Reels seems strong."
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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