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Facebook reported 2018 Q3 earnings after the bell, and initial reactions are positive. Shares were trading up over 3% in after hours trading on top of the already 3% increase from the regular trading day. In all, Facebook beat analyst consensus on earnings and missed on revenues while growth continues to decelerate. A forecast for slowing growth was included in the Q2 call, but the results did not show as much of a slowdown as previously projected.

By the Numbers:

Earnings per share (EPS): $1.76 reported, beating analyst consensus of $1.47. Earnings up 11% year over year.
Revenue: $13.73 Billion, slightly lower than the analyst expected $13.78 Billion. Revenue up 33% year over year.
Monthly Active Users (MAU): 2.27 Billion, lower than the analyst expected 2.29 Billion
Daily Active Users (DAU): 1.49 Billion, lower than the analyst expected 1.51 Billion

To put it into perspective, the earnings and revenue numbers look decent. Both the monthly and daily user metrics are up 11% year over year. Facebook's operating margin narrowed to 42% down from 50% a year ago. Across individual geographic segments, both revenue and advertising revenue were up across the board.

User Metrics:

Both monthly and daily active users breakouts show US & Canada numbers were up slightly, while European user numbers were down slightly. Users in the Asia-Pacific and rest of the world accounted for overall user growth.

Mark Zuckerberg mentioned on the call that across the full portfolio of Facebook owned applications, there are 2.6 Billion daily users (up 100 million users since last quarter). Think about that for a second, population estimates of ~7.6 Billion people means roughly a third of the Earth's population use Facebook, WhatsApp, Instagram, or Messenger daily.

Also on the call, the "Stories" feature was mentioned as growing faster than Facebook can monetize the product. Mark Zuckerberg indicated additional work will need to be done to develop ad products and further monetize the content. He even went as far as saying Stories would be bigger than the News Feed feature that makes up the majority of the user experience today.

Other notable mentions:

Messaging across all platforms exceeding 100 billion messages per day. While Facebook will continue to invest in the platform, it isn't clear how they will further monetize the service.

Video continues to grow, notably with the Facebook Watch and Instagram TV (IGTV) standalone products. For those not familiar with the platform, these are services that are more akin to video channels like Google's Youtube. However, on a per minute metric, standalone video monetizes significantly less according to Mark Zuckerberg.



Link to Press Release:

https://investor.fb.com/investor-news/press-release-details/...


Link to Conference Call Transcript:

https://www.fool.com/earnings/call-transcripts/2018/10/30/fa...


Link to 2018 Q3 Conference Call Slide Deck Presentation (PDF):

https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q3...

More Foolish Coverage:

Facebook Earnings: Growth Continues to Decelerate - https://www.fool.com/investing/2018/10/30/facebook-earnings-...

Other Coverage: Facebook Gains Following Mixed Results and Guidance: 7 Key Takeaways - https://www.thestreet.com/opinion/facebook-gains-following-m...


If you like this type of coverage and would like to see more of it, let me know by hitting the "Recommend It!" button or leave a comment. More importantly, feel free to chime in with your thoughts and expectations for Q3.


CMFHeavyMetal

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Ticker Guide for Costco Wholesale (COST), Enbridge (ENB), Facebook (FB), & iQiyi (IQ)
Disclosure: May own shares of some, or all of the companies mentioned in this post. (http://tinyurl.com/HM-Disclosure)
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