Facebook’s first-quarter profit climbs on strong advertising revenue

Company’s net profit soared to $9.4bn in three months to March 31

FILE PHOTO: Attendees walk past a Facebook logo during Facebook Inc's F8 developers conference in San Jose, California, U.S., April 30, 2019.  REUTERS/Stephen Lam/File Photo  GLOBAL BUSINESS WEEK AHEAD

Social-networking company Facebook's first-quarter net profit surged more than 93 per cent on the back of rising advertising revenue.

The Menlo Park-based company’s net profit soared to $9.4 billion in the three months ending March 31, nearly $4.5bn more than the same period a year earlier.

Revenue during the quarter increased 48 per cent on an annual basis to $26.1bn, beating analysts' average estimate of $23.6bn.

"We had a strong quarter as we helped people stay connected and businesses grow," said Mark Zuckerberg, Facebook’s billionaire founder and chief executive.

Facebook attributed the significant increase in revenue to a “30 per cent yearly rise in the average price per ad and a 12 per cent surge in the number of ads delivered” in the first quarter.

The company's stock was up nearly 5.7 per cent in after-hours trading to $324.8 a share on Wednesday.

The share price has increased more than 58 per cent in the past year.

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The company spent more than $4.4bn in capital expenditure in the first quarter, nearly $4m less than the amount spent in three months to December 31.

Facebook said it expects its 2021 capital expenditure to hover in the range of $19bn to $21bn, down from its prior estimate of $21bn to $23bn.

It is driven primarily by its investments in data centres, servers, network infrastructure and office facilities.

Mark Zuckerberg, Facebook’s founder and chief executive, says the company will invest aggressively to deliver new and meaningful experiences. AFP

“We will continue to invest aggressively to deliver new and meaningful experiences for years to come … including in newer areas like augmented and virtual reality, commerce and the creator economy,” Mr Zuckerberg said.

The platform’s daily active users increased 8 per cent yearly to reach 1.8 billion in the January to March period. Its monthly active users grew 10 per cent to 2.8 billion.

Facebook’s chief financial officer David Wehner predicts that advertising revenue growth will continue to be primarily driven by price during the rest of the year.

“We expect second quarter year-over-year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter,” Mr Wehner said.

In the third and fourth quarters, Facebook expects the annual revenue growth rate to “significantly decelerate sequentially”, he said.

The company said it would continue to face "uncertainty" this year.

“We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently launched iOS 14.5 update, which we expect to begin having an impact in the second quarter,” Mr Wehner said.

Apple’s new software update iOS 14.5 is intended to make it harder for advertisers to track people as they rotate between different apps on their device.

People will be given the option to opt in or out of app tracking. This will restrict how technology companies such as Facebook and Google gather data for advertising purposes.

Facebook, which owns Instagram and WhatsApp, saw a sharp rise in the number of users of its platforms during the Covid-19 pandemic.

Many people switched to social media and home entertainment options during lockdowns.

Total expenses for the year will be between $70bn and $73bn, the company said, narrowing a prior forecast of $68bn to $73bn.

“We remain committed to investing for long-term growth and our expense outlook reflects the underlying strength of our business and the compelling investment opportunities we see across our products, including consumer hardware,” Mr Wehner said.

The company invested almost $1.4bn on research and development during the quarter, almost $409m more than the same period last year.

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