Facebook Sees Its Shares Rise in Monday’s Extended Trading Following The Release Of Its Q3 Results that Surpassed Analyst’s Expectations

Shares of tech giant Facebook were up over 1 percent in extended trading on Monday, following the release of its third-quarter results which beat the expectations of analysts. The release of the results also came with the announcement that the tech company would be increasing its share buyback program by $50 billion.

The company published earnings of $3.22 per share and beat the expectation of $3.19 per share, according to Refinitiv. The tech company also realized revenue of $29.01 billion and was a little short of analysts’ expectations. The expected amount for revenue according to Refinitiv is $29.57 billion, automatically translating to the company being short of the expectation by about $56 million. The figure published for daily active users (DAUs) was on par with analysts’ expectations. Facebook posted daily active users of 1.93 billion for the quarter. The figure for monthly active users (MAUs), however, also fell short of analysts’ expectations. Facebook had 2.91 billion monthly active users (MAUs) in the third quarter compared to analysts’ expectation of 2.92 billion. The average revenue per user (ARPU) was $10.00 compared to analysts’ expectation of $10.15, according to StreetAccount.

Revenue from Facebook’s “other” segment which covers consumer hardware such as its Oculus virtual reality headsets was up 195 percent at $734 million, surpassing the expectation of $477 million, according to StreetAccount. Its free cash flow, however, fell short of the expectation of $9.9 billion according to StreetAccount estimate. The company had a free cash flow of $9.55 billion.

The company also announced that it’ll be making some changes in the coming year to improve its services and subsidiary platforms. The company plans to place more importance on its full-screen video Reels feature both on Facebook and Instagram. The company is making this change so as to appeal to a younger audience of 18-20 years, Mark Zuckerberg revealed to analysts. He said that rather than optimizing for the larger number of old people, the company will be refocusing on young users. “Over the last decade as the audience that uses our apps has expanded so much and we focus on serving everyone, our services have gotten dialled to be the best for the most people who use them rather than specifically for young adults”.

“This shift will take years, not months, to fully execute, and I think that’s the right approach to building our community”, he added emphasizing that the change will not be immediate but rather gradual. The Facebook CEO also added that Reels will be an important part of Facebook’s shift, the same way Stories and News Feed were. “Reels has the potential to be something of that scale,” he said.

Another announcement that followed the third-quarter earnings release is Facebook’s plan to separate its Reality Lab into its own reporting segment starting from the next quarter. The unit which focuses on hardware augmented reality and virtual reality products is expected to reduce operating profit in 2021 by about $10 billion.

Facebook’s revenue increased 35% from a year earlier, while net income rose 17% to $9.2 billion, from $7.8 billion a year ago. Like other companies, Apple’s newly-introduced App Tracking Transparency Feature on iPhones had an impact on Facebook’s ad business. Facebook rival, Snap Inc. saw its shares plunge 25 percent after publishing poor results which it attributed to Apple’s recently introduced App Tracking Feature. According to Facebook’s CFO – Dave Wehner, the changes that Apple introduced were the biggest setback the company faced in the quarter and that if not for this challenge, “we would have expected sequential growth from Q2 to Q3”. The ATT feature limits Facebook’s ability to target ads to users and because of it “we don’t see the same level of conversion data coming through” but “Facebook will rebuild its targeting and optimization systems to work with less data”, Facebook’s COO Sheryl Sandberg said.

Speaking to analysts, she said that Facebook is experiencing slowing e-commerce as more physical locations open up and people are returning to the traditional buying system. “Businesses are still making the shift online, but e-commerce is no longer growing at the pace it was at the height of the pandemic”, she said. She also talked about the decresing spending on advertising as a result of global supply chain issues as well as labour shortages and how these are affecting the company and companies like Facebook. Irrespective of these challenges, she emphasized that Facebook remains strong, positive and confident about the future. “We believe we’re still the best platform for advertisers to reach people where they are and get measurable outcomes”, she said.

In the third quarter, Facebook had 3.58 billion monthly users across its family of apps – Facebook, Instagram, Messenger and Whatsapp, which is an improvement to 3.51 billion users recorded in the second quarter.

The tech giant expects fourth-quarter revenue to fall between $31.5 billion to $34 billion and emphasized that the forecast took into consideration, the effect of Apple’s operating system changes, as well as other factors such as supply chain challenges and the still-raging coronavirus pandemic.

Last week, Facebook revealed plans to change its brand name into something that’ll reflect that it is more than a social media company. This is one of the changes to expect from the tech giant soon. Mark Zuckerberg is expected to announce the name change at the company’s Connect conference on the 28th of October, but there’s the possibility of the new name being unveiled earlier.

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