Facebook (Getty images)
Facebook (FB) will report second quarter fiscal 2016 earnings results after the closing bell Wednesday.
For the three months that ended June, the Menlo Park, Calif.-based company is expected to earn $1.12 per share on revenue of $9.2 billion, translating to year-over-year growth of 15.4% and 43%, respectively. For the full year, ending in December, earnings are projected to rise 15% year over year to $4.87 per share, while revenue of $38.58 billion would rise roughly 40% year over year.
Apart from the top- and bottom-line numbers, all eyes will be on the company’s growing user base, which Facebook seems to deliver on regardless of how massive its user total appears to be. The company ended the first quarter with 1.94 billion monthly active users and 1.28 billion daily active users, marking a year-over-year increase of 17% and 18%, respectively. The company has since passed the 2 billion user threshold.
Wall Street is eager to learn how much more runway does the social media giant have left, not only on its core Facebook platform, but also on Messenger and WhatsApp, which have both topped one-billion monthly active users. But North American and European markets approaching what analysts have called “full penetration,” Facebook will need to show growth in other regions such as Asia and parts of the world that can sustain user growth in the years ahead.
On Wednesday there will also increased excitement about Instagram, which last quarter topped 700 million monthly active users, up from 600 million in the fourth quarter. By launching Instagram Stories, a feature similar to Snapchat’s popular Stories offering, Instagram so far has proven to be a worthwhile competitor in its heated battle with Snap (SNAP) and, to a lesser extent, Twitter (TWTR). And this makes Instagram’s revenue performance, particularly from an advertising perspective, even more critical for Facebook.
Elsewhere, the topic of ad loads will likely be raised. In an effort to improve the user experience, Facebook management, on more than one occasions, has warned it won’t attempt to inject more ads in its core Facebook platform — a decision that can reduce the revenue growth rate. And this would put more of the responsibility on Instagram, which seems so far to not be a factor. Likewise, the strength of online and mobile advertising revenues will be heavily scrutinized.
Facebook’s mobile ad revenue surged 58% in the first quarter, and accounted for about 85% of its overall ad revenue. Not only has Facebook’s mobile ad business emerged as the major contributor to its advertising revenues, the company's ability to monetization mobile, compared to that of Alphabet’s (GOOG , GOOGL) Google, has been the biggest driver of FB stock, which have skyrocketed 44% year to date and trading at all-time highs.
It would seem Wall Street is betting not only a top- and bottom-line beat Wednesday, but also expecting commentary that implies Facebook’s advertising dominance can sustain growth for the foreseeable future. And given the company’s track record, those are three solid bets.
At the time of publication, the author was long FB stock.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
