Facebook Tops Q3 Estimates, Reaching 1.35 Billion Monthly Users

Facebook, the world’s largest social-media service, hit 1.35 billion monthly active users as of the end of the third quarter, up 14% year-over-year, and exceeded Wall Street financial estimates.

The company’s Q3 2014 revenue was $3.20 billion, an increase of 59% from the year-ago period, and it posted a net profit of $806 million (43 cents per share), up 90% versus the year-ago quarter. That beat consensus estimates of $3.12 billion in revenue and EPS of 40 cents, per Thomson Reuters.

Still, Facebook shares dropped in after-hours trading by as much as 1.8%, as investors were potentially looking for even stronger growth.

“This has been a good quarter with strong results,” Facebook founder and CEO Mark Zuckerberg said in announcing the results. “We continue to focus on serving our community well and continue to invest in connecting the world over the next decade.”

Facebook’s ad revenue was $2.96 billion (up 64% year-over-year), with mobile advertising revenue accounting for 66% of that in the period up from approximately 49% in Q3 2013. Mobile monthly active users — a subset of its total MAU number — were 1.12 billion for the most recent quarter, a 29% increase from a year ago.

On a call with analysts, Zuckerberg said Facebook continues to make progress with Oculus Rift, the virtual-reality startup it acquired this summer for $2 billion.

Oculus has shipped more than 100,000 Rift developer kits worldwide. But “it needs to reach a very large scale — 50 (million) to 100 million units — before it will really be a meaningful thing as a computing platform,” Zuckerberg said. “I don’t think it’s going to get to 50 or 100 million units in the next few years… When you get to that scale, that’s when it starts to be interesting as a business in terms of developing out the ecosystem.”

Also on the call, CFO Dave Wehner said Q4 2014 revenue is projected to increase 40% to 47% over fourth quarter 2013. For the full-year 2014, Facebook expects total expenses to grow 45% to 50% versus full-year 2013, primarily related to the company’s $19 billion acquisition of WhatsApp, he said. In 2015, total expenses are projected to increase 55% to 75% compared with 2014, according to Wehner, saying the company will continue to invest in the core Facebook experience, advertising technology, the WhatsApp and Oculus acquisitions, and other projects.

Facebook clearly didn’t buy WhatsApp for its financial prowess. In 2013, WhatsApp generated $10.2 million in revenue and reported a net loss of $138 million, according to a regulatory filing Tuesday.

Over all in 2014, Facebook is expected to capture 8% of the $140.7 billion global ad market, up from 5.8% last year, according to research firm eMarketer. In addition, the company’s share of the $36.5 billion worldwide mobile ad market is expected to reach 20.4% this year, up from 16.5% in 2013, per eMarketer. By comparison, Google is expected to lose mobile ad market share this year, falling from 46.4% in 2013 to 44.6% this year.

Average revenue per user worldwide was $2.40 for Q3 2014, versus $1.72 in the year-earlier period (a 40% increase). In the U.S. and Canada, ARPU was $7.39 for the most recent quarter, up 52% from $4.85 in Q3 2013.

As of the end of September, Facebook had $9 billion in cash and equivalents, compared with $3.3 billion at the end of 2013.

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