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Facebook Q3 2018 earnings come in lower than expected

Facebook Q3 2018 earnings come in lower than expected

The results fell short in terms of revenue, daily active user and monthly active user estimates in the company’s latest earnings report, despite exceeding analyst expectations on earnings per share

Facebook also told investors to expect increased expenses in 2019.

The third-quarter earnings reported after bell were as follows: Earnings per share (EPS) was $1.76 vs an estimated $1.47; Revenue was $13.73 bn vs a $13.78bn estimated; Daily active users (DAUs) were 1.49 vs an estimated of 1.51bn; Monthly active users (MAUs) were 2.27bn vs an estimated of 2.29bn. Finally, Average revenue per user was $6.09 per 2.29bn—the same as estimated.

The social media giant’s shares were down as much as 6% and up as much as 5% after hours as investors dissected CEO Mark Zuckerberg’s comments on future spending and growth. They finally settled in positive range, up about 3%, after the conclusion of the company’s earnings call.

Zuckerberg stated on the call that the company plans to invest significantly in the business in 2019 as it focuses on building out new products such as Facebook Watch, Instagram TV and Facebook Marketplace and improving its cyber security procedures.

Facebook CFO David Wehner said 2019 total expenses will grow 40-50% from 2018.

“I want you to know that looking out beyond 2019, I know that we need to make sure our costs and revenue are better matched over time, and that’s something that I am focused on as well,” Zuckerberg said.

Facebook stated that it’s expecting between $18-$20bn in capital expenditures in 2019, which lies above the FactSet analyst estimate of $17.29bn.

Zuckerberg also took the time to discuss the company’s progress with it’s “Stories” feature, emphasizing its faster-than-expected growth and the need for its monetisation by building ad products.

“This is one of those situations where the community growth that we’re seeing is outpacing the progress that we have made so far on developing the ads in that space,” he said.

Zuckerberg also discussed the company’s challenges with user safety and harmful content, saying Facebook has made progress but it will likely not have a firm grasp on the problem until end of 2019.

“We’re getting better and better at this, but I anticipate that it will be about the end of next year when we feel like we’re as dialed in as we would generally all like us to be,” he said. “And even at that point, we’re not going to be perfect.”

More than 2.6 bn people use the Facebook family of apps per month, according to the company. These include Facebook, WhatsApp, Instagram or Messenger. That figure was up 100mn more people from last quarter. More than 2bn people a day use at least one of those apps.

The company also stated that it increased headcount 45% and the costs went up 53% as well. More than 92% of its advertising revenue for the quarter came from mobile advertising, up from 88% YoY.

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