Facebook (FB) is poised to report second-quarter earnings after market close on Wednesday, with the recovery across the internet advertising industry set to help lift the social media company's results.
Here are the main metrics Facebook is expected to post, compared to consensus estimates compiled by Bloomberg:
Revenue: $27.86 billion expected vs. $18.69 billion Y/Y
Adjusted earnings per share: $3.53 expected vs. $2.29 Y/Y
Much stronger-than-expected earnings results from peer ad-driven internet companies Snap (SNAP) and Twitter (TWTR) last week raised the bar for Facebook's second-quarter results. Both the parent company of Snapchat and Twitter handily exceeded quarterly user and sales growth, pointing to solid user retention on the platforms even as in-person activities returned and vied for attention. Their sales and earnings beats suggested monetization of these users was also improving.
But with more than 10 million active advertisers, Facebook remains a reigning leader in the online advertising space, and it has grown strongly over the course of the pandemic even as many businesses trimmed their marketing budgets. Revenue for the second quarter is expected to grow 49% over last year to nearly $27.9 billion, marking the fastest growth rate since early 2018.
And that's set to come even as user growth decelerates for the massive platform, with monthly active users across all Facebook properties including Instagram and WhatsApp expected to increase 11.2% over last year to 3.9 billion. That compares to a 13.8% growth rate in the same quarter last year, and a 15.4% rate during the first quarter.
"We see three core catalysts in 2021: Rising Mobile advertising revenue, Video advertising and Instagram monetization," Cowen analyst John Blackledge wrote in a note. "We expect Instagram to continue to increase its user count in 2021 and beyond, which should serve as a longer-term catalyst."
For the second quarter, one of the key risk areas investors will be watching will be about how Facebook has navigated Apple's recent ID for Advertisers (IDFA) software update. This update allows users to opt out of tracking in apps on iOS devices — a move which Facebook has suggested would decrease developers' ability to monetize ads. Users have implemented the update over the past several months, though some analysts have suggested the impact to Facebook's ad-centric business will be smaller than previously feared.
"We acknowledge concerns around iOS14.5+ changes have ramped of late, and we expect it to be a key topic on the call, but we ultimately expect only modest impact to growth," JPMorgan analyst Doug Anmuth wrote in a note. "Our checks suggest large platforms are best positioned to manage through IDFA/ATT [Ad Tracking Transparency], and we remain confident in FB's ability to adapt. As we've seen in the past, FB's large base of 10M+ advertisers creates high auction density, and even if select marketers reduce their spending on the platform, others will likely step into the auction."
Updates on Facebook's commerce ambitions will also be closely monitored, as the company continues to invest heavily in building out its payments and shopping experiences across each of its core Facebook, Instagram and WhatsApp platforms. Facebook CEO Mark Zuckerberg acknowledged the company's commerce offerings like Facebook Marketplace and Instagram Shopping have become increasingly important as the pandemic accelerated the consumer shift to making purchases online, and said last quarter that building out a full-featured commerce platform across all the company's services will be "a multiyear journey."
"Shopping remains a big focus as FB's ability to improve ad conversion and monetize organic posts with shopping capabilities could help offset tougher 2H21 revenue comps," Bank of America analyst Justin Post said in a note. "Longer term, messaging remains a potentially large revenue drive and Facebook has seemingly been more constructive on AR/VR [augmented reality/virtual reality] traction, plus time spent on Instagram and IG Reels seems strong."
This post will be updated with the results of Facebook's earnings results Wednesday after market close. Check back for updates.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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