In its results for the three months ended September 30, 2020, released after the close on Thursday, Facebook reported revenues of US$21.5bn, up from US$17.7bn in the year-earlier period and ahead of the US$19.8bn predicted by analysts. Earnings, meanwhile, came in at US$2.71 per share compared to US$2.12 in 2019 and ahead of estimates of US$1.91.
Active users, one of the company’s most important metrics, also surpassed estimates, coming in at 1.82bn compared to forecasts of 1.79bn, while monthly active users were at 2.74bn compared to estimates of 2.7bn.
However, Facebook’s daily active user base in the US and Canada fell to 196mln from 198mln in the second quarter of the year, which it said had been elevated due to the coronavirus pandemic.
Looking ahead, the company said it expected this trend in the two countries to continue with daily and monthly active users in the US and Canada expected to be “flat or slightly down” in the fourth quarter of the year compared to the current figure.
However, Facebook added that it expected year-on-year ad revenue growth rate in the fourth quarter to be higher than the third, driven “by continued strong advertiser demand during the holiday season”. The firm also said strong orders for its Oculus Quest 2 virtual reality headset should benefit its other revenue streams.
Into 2021, the company cautioned that it could experience “more significant targeting and measurement headwinds” from platform changes and evolving regulations. Facebook also said the pandemic has accelerated demand for online commerce advertising, and that any change in this trend in the coming year “could serve as a headwind” to its 2021 ad revenue growth.
"We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times", chief executive Mark Zuckerberg said in a statement.
"We continue to make significant investments in our products and hiring in order to deliver new and meaningful experiences for our community around the world", he added.
In a note on Thursday, analysts at Oppenheimer maintained their ‘outperform’ rating and US$300 target price on the company, saying they disagreed with the companies cautious stance on 2021 as it was “unlikely” consumers will return to normal in-store shopping behaviour until a coronavirus vaccine is widely available, adding that the shift to online commerce was “likely a one-way trend given the benefits of convenience and value”.
"Similar to other social media platforms, Facebook showed no signs that it was feeling the squeeze from the coronavirus pandemic. Despite an ongoing boycott, small and medium-sized businesses, which make a much bigger contribution to the company’s overall sales, continued to allocate their ad dollars to Facebook”, said Jesse Cohen at uk.investing.com.
"Facebook has positioned itself for even faster growth in the quarters ahead as it continues to grab market share of digital ads. The blowout results helped ease concerns that Facebook is losing business to other social media platforms, such as Pinterest and Snapchat”, he added.
Despite the earnings and revenue beat, the decline in US and Canadian users appeared to have soured investors, with Facebook shares down 2.5% at US$273 in pre-market trading in New York on Friday.