Facebook warns again on ad growth, shares dip from high

Facebook has reported better than expected earnings for the first quarter of 2017 as the social media site approaches 2 billion monthly active users. It earned $7.86 billion in advertising revenue, up 51 percent from a year ago, and higher than the $7.68 billion expected by a StreetAccount estimate.

Now using GAAP accounting as opposed to non-GAAP, Mark Zuckerberg's company reported earnings per share (EPS) of $1.04 on revenue of $8.032 billion.

New products, such as ads that play in the middle of videos or appear on Facebook's Messenger app, could fuel growth, but Wehner and Chief Executive Mark Zuckerberg said on Wednesday those plans were still in early stages. We are continuing to build tools to support a strong global community. Its Mobile ad revenue increased 58% to $6.7 billion over prior year period, representing close to 85% of total ad revenue.

In its report, Facebook said it had 1.94 billion monthly active users on March 31st, an increase of around 300 million from the same time a year ago.

Facebook continued its march toward the 2 billion user threshold, saying it had about 1.94 billion people using its service monthly as of March 31. CFRA Research analyst Scott Kessler said Facebook's stronger-than-expected results may have given investors more enthusiasm about how Snap will perform when it issues fiscal first quarter results on May 10 - its inaugural financial report since going public earlier this year.

"A great quarter, but what comes next?" said Rob Sanderson, analyst at MKM Partners. Based on this quarter's earnings, Facebook has exceeded analyst expectations for eight straight quarters.

It's not just Facebook's user figures that are growing either, the company's profits are on the rise too.

Some companies diversify through acquisitions, but most of Facebook's purchases such as Instagram and WhatsApp have been in adjacent markets. We also expect desktop ad revenue growth rates to slow in the third quarter when we begin to lap our efforts to limit the impact of ad blockers.

"With that foundations our next focus will be building community", he said.

Facebook has warned for some time about declining non-ad revenue. Interestingly, the company stopped breaking out its number of mobile users - essentially, for Facebook, nearly every user is now a mobile user.

It is as dependent on advertising as critics say Google once was, but with less intention of changing. The company spun off its Messenger chat tool as a separate app in 2014, and just this year started testing advertising on it, alongside bot functions that let businesses reach consumers.

  • Arturo Norris