Facebook Announces Its Fourth Quarter Earnings Announcement
In its quarterly earnings announcement, Facebook CEO Mark Zuckerberg touted his company’s investments in research, stating that other companies should follow in his footsteps. But the biggest change in the company’s earnings forecast was the severing of the Family of Apps (FoA) from the main business. The company will separate out its VR and AR business, called Facebook Reality Labs, in the fourth quarter. The company will focus on hardware, virtual and augmented reality, while excluding Facebook Messenger and its family of apps. The new segment will reduce operating profit by $10 billion per year by 2021, but will still contribute to growth and profitability.
The company will report revenue and operating profit for two segments, Facebook Services and Facebook Reality Labs, a division focused on augmented and virtual reality. The news follows the disappointing quarterly results from Snap, another popular social network. The company said that iPhone privacy changes forced advertisers to curtail their spending. It also provided a revenue estimate lower than analyst estimates, and shares fell 26.6%. On Wednesday, it was reported that Zynga will take a large portion of the company’s revenue from Snapchat.
On the earnings call, Mark Zuckerberg said the company had a challenging quarter — the company faced outages, and he pushed regulators to buy into its Libra cryptocurrency project. In addition, his campaign to break up Facebook resurfaced, forcing the company to spend more than it had in the past few quarters. This could result in lower revenues and profits for Facebook. However, despite this downturn, he insists that the company will navigate its way through these issues in time.
The earnings report also included an underlying trend. The company’s growth was down 12%. This is not unusual, though, because the company has continued to grow its user base. Moreover, it’s a cyclical phenomenon, which means that the numbers could come back down. In fact, it could take a year or two to recoup losses from its losses. The stock is expected to rise more than 5% in the following quarter.
As far as the company’s revenue projections are concerned, it should continue to show strong growth in its core markets. It’s worth mentioning that it has gained two million users in its core markets over the last two years, while losing millions in the developing world. The results will be critical for the company’s long-term strategy. This is a positive sign for investors, but the downside remains that the company’s strategy to capitalize on its mobile users is not working.
Meanwhile, the company’s third quarter earnings will be a disappointment. While it’s not the best quarter for a company like Facebook, it has struggled to keep users engaged. The social network has faced a tough quarter due to outages and changes in the iPhone’s privacy settings. As a result, the company’s stock fell more than 26%. The news was also a sign that the company’s plans for its next quarter are not all about profit, but to keep its users informed.
As the company continues to improve its core app family, it also plans to separate its AR/VR operations. While the company has a very impressive mobile audience, it’s difficult to predict its future profitability. Even so, Facebook’s upcoming Q3 results are likely to be an interesting watch. During the call, the company’s executives will outline the latest developments and discuss the company’s strategy for growth. In fact, the news will likely be a major source of information for investors.
The company also revealed its Q1 FY 2021 revenue and earnings. Revenue and EPS increased by 92.8% YOY, and profit per share rose 47.6%. The company also emphasized strong growth in ad revenue, driven by its ACP (average cost of ad) and its total number of ads delivered. Amid these challenges, Facebook is focusing on its “metaverse” and its “core apps”.
In Q3 FY 2021, Facebook is expected to report strong results. The company has been experiencing a rough quarter, with outages and privacy concerns. It has also struggled to gain regulatory approval for its crypto-currency Libra project. Its split-up of its virtual reality division is a big deal. Its stock has already rallied more than twice as much in just one day. During the regular session, the company posted a record-breaking year.
