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Facebook shares up on impressive Q2 revenue beat

Following the release of solid Q2 results, Facebook's share price climbed as high as 3.47% in after-hours trade before falling lower.

Facebook Inc (All Sessions), the now $584 billion social media behemoth, reported its Q2 earnings after the market close on Wednesday.

The reception was mixed: although Facebook’s share price initially popped 3.47%, at the time of writing, it was up just 0.66% in after-hours trade.

Here are the key things we learnt from Facebook's second quarter release:

Facebook beats revenue estimates

On the face of it, Facebook’s initial after-hours share price spike was likely related to the company posting Q2 revenues that beat even the highest analyst estimates.

Bloomberg Data noted that Facebook Inc (All Sessions) reported Q2 revenues of $16.89 billion, a 28% increase year-over-year.

This was higher than even the most bullish of revenue estimates, which ranged from $16.28 to $16.83 billion.

Facebook’s CEO, Mark Zuckerberg said of the company’s Q2 results:

‘We had a strong quarter and our business and community continue to grow. We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services.’

Indeed, this revenue beat looks to be a positive indication for the company; especially given the fact that Facebook has been warning that top-line growth would begin to slow for some time now.

On that front, Facebook’s CFO, David Wehner even noted during Q1 that ‘we continue to expect that our revenue growth rates will decelerate sequentially throughout 2019’.

Though the company saw strong revenue growth, earnings suffered from steep legal expenses and a $1.1 billion tax bill – with Q2 earnings per share (EPS) coming in at $0.91 versus $1.74, the year prior.

Regardless of this, the company remains in an enviable financial position and currently holds $48.60 billion in cash and cash investments on its balance sheet.

Users still flock to ‘the Facebook’

Impressive revenue growth was matched by consistent user engagement in the second quarter.

Both daily and monthly active users increased 8% year-over-year – hitting 1.59 billion and 2.41 billion, respectively.

Of these figures, the company pointed out that:

‘We estimate that more than 2.1 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our "Family" of services) every day on average, and more than 2.7 billion people use at least one of our Family of services each month.’

Canadian & US users continued to be the most valuable to Facebook’s top-line in Q2. On the basis of advertising revenue, these users alone contribute a massive 47.8%.

Though US & Canadian users proved the most valuable, it is user figures from the Asia-Pacific region that exhibited the most impressive growth – adding 15 million daily active users in the second quarter.

Ultimately, while news of Facebook’s privacy breaches have often caused wide-spread controversy, as the Q2 results clearly show: users continue to engage with the platform and show little signs of leaving any time soon.

Antitrust investigations intensify

Even though user engagement remains strong, with two antitrust investigations on its hands, how Facebook Inc (All Sessions) investors fully digest and respond to this information will prove telling.

While the Q2 release notes that Facebook has agreed to ‘a penalty of $5.0 billion and to significantly enhance our practices and processes for privacy compliance and oversight,’ it also points out that the FTC has launched a new antitrust investigation into the company's competitive practices.

Adding to this investigation, and as we covered just yesterday – the Department of Justice is also in the process of launching its own antitrust review into big tech.

Even with all this considered, of the 53 analysts following the company, 45 rate it as a buy. Only two rate it as a sell.

Year-to-date Facebook’s share price has gained 49%, more than doubling the returns of the NASDAQ.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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