Facebook’s third-quarter profit rises as revenue jumps

The company expects a “significant amount of uncertainty" next year

FILE PHOTO: The Facebook logo is displayed on a mobile phone in this picture illustration taken December 2, 2019. REUTERS/Johanna Geron/Illustration/File Photo
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Social networking company Facebook reported a 29 per cent rise in its third-quarter net profit due to higher advertising revenue.

Net profit for the three months ending September 30 climbed to $7.84 billion, the US based company said in a statement on Thursday. Advertising revenue jumped 22 per cent to $21.22bn and total costs and expenses rose 28 per cent to $13.43bn.

"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," Mark Zuckerberg, Facebook founder and chief executive, said. "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."

Facebook’s monthly as well as daily active users jumped as many people spent more time online due to the coronavirus related restrictions. Monthly active users were 2.74 billion as of September 30, 2020, an increase of 12 per cent year-on-year.

“We expect our fourth quarter 2020 year-over-year ad revenue growth rate to be higher than our reported third quarter 2020 rate, driven by continued strong advertiser demand during the holiday season. Additionally, Oculus Quest 2 (virtual reality headset) orders have been strong which should benefit other revenue.”

In 2021, however, the company is expecting to face a “significant amount of uncertainty.”

“We believe the pandemic has contributed to an acceleration in the shift of commerce from offline to online, and we experienced increasing demand for advertising as a result of this acceleration. Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth.”

“In addition, we expect more significant targeting and measurement headwinds in 2021. This includes headwinds from platform changes, notably on Apple iOS 14, as well as those from the evolving regulatory landscape.”

There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, it added.

The total capital expenditure in 2020 is expected to be approximately $16bn and for 2021, it is expected to be in the range of $21 to $23bn, driven by investments in data centres, servers, network infrastructure, and office facilities.

Facebook’s DAUs (Daily Active Users) and MAUs (Monthly Active Users) in the US and Canada declined slightly from the second quarter of 2020 levels which were elevated due to the impact of the Covid-19 pandemic.

Facebook stock was down more than 2 per cent on Thursday after the company reported a decrease in users in the US and Canada but moderate revenue growth in its third-quarter earnings.