Facebook had yet another stellar quarter, posting revenue of $7.01 billion and earnings per share of $1.09 thanks to strong mobile advertising earnings which rose roughly 78 percent over the year-ago quarter.
In its third quarter, the social network’s membership enjoyed a 4.67 percent growth rate, rising to 1.79 billion monthly users, a 16 percent year-over-year increase.
“We had another good quarter. Our community continues to grow around the world,” Facebook CEO Mark Zuckerberg said during an earnings call with analysts. “We’re pleased to see nearly 1.8 billion people now use Facebook every month and nearly 1.2 billion people use it every day. It’s also great to see the continued growth and strength of engagement on our platform, and our ads growth is growing at a healthy rate as well.Total revenue grew by 56 percent year-over-year to $7 billion, and advertising revenue was up 59 percent to $6.8 billion.”
Despite posting such strong numbers, however, Facebook’s stock was down more than eight percent in after-hours trading.
That was because investors did not like what fiscal 2017 holds for the company.
Facebook chief financial officer David Wehner told investors that ad load is likely to be a less significant factor for driving revenue growth after mid-2017.
“Over the past few years, we have averaged about 50 percent revenue growth in advertising. Ad load has been one of the three primary factors fueling that growth,” Wehner said. “With a much smaller contribution from this important factor going forward, we expect to see ad revenue growth rates come down meaningfully.”
Wehner also told investors that 2017 “will be an aggressive investment year.”
“Adding top engineering talent remains one of our key investment priorities as we continue to execute on our 3, 5, and 10-year roadmap,” he said. “We will continue to invest in our ability to recruit top technology talent, both in the Bay Area and beyond. In addition, we expect to grow capital expenditures substantially, as we continue to fund the ongoing data center expansion effort that we have underway.”
As Business Insider pointed out, this is not the first time Facebook has warned its stock holders about a year of investment. The social networking firm did the same thing back in 2015 where spending accelerated enough to overshadow earnings. 2016, however, saw the company return to massive revenue growth.
It could very well be that this will be a pattern for Facebook. As Business Insider noted, it appears Facebook is establishing a “tic-toc” system, in which odd years are designated for a significant increase in spending and, in even years, spending is dialed back as revenue rates enjoy a sharp increase.
“If the pattern holds true, then 2017 should be an investment year and 2018 will be a year f0r shareholders to reap the benefits,” the publication predicted.
It certainly makes sense to implement such a system. After all, as the old saying goes, you have to spend money to make money. And if Facebook stays true to its pattern, the biggest winners will be its investors.
Jennifer Cowan is the Managing Editor for SiteProNews.
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