A month has gone by since the last earnings report for Facebook (FB Quick QuoteFB - Free Report) . Shares have added about 1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Facebook due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Facebook Q1 Earnings Beat Estimates, Revenues Up Y/Y

Facebook’s first-quarter 2021 earnings of $3.30 per share beat the Zacks Consensus Estimate by 39.8% and surged 93% year over year.

Revenues of $26.17 billion comfortably surpassed the Zacks Consensus Estimate by 9.8% and also rose 47.6% year over year. At constant currency (cc), the top line improved 44%.

Geographically, Asia-Pacific, Europe, the United States & Canada, and Rest of World (RoW) revenues grew 53.3%, 47%, 44.9% and 47.5%, on a year-over-year basis, respectively.

Average Revenue per User (ARPU) in Europe, the United States & Canada, Asia-Pacific and RoW grew 45.6%, 40.5%, 28.8% and 32.7% on a year-over-year basis, respectively.

Advertising Revenue Growth Strong

Facebook’s first-quarter advertising revenues increased 45.9% year over year (42% at cc) to $25.44 billion.

Meanwhile, Facebook’s Asia-Pacific, Europe, the United States & Canada and RoW advertising revenues grew 46.3%, 52.8%, 42% and 47.2%, on a year-over-year basis, respectively.

Ad impressions served rose 12% and the average price per ad increased 30% from the year-ago quarter.

User Base Continues to Expand

Monthly active users (MAUs) were 2.853 billion, up 9.6% year over year. Daily Active Users (DAUs) were 1.878 billion, which increased 8.3% year over year and represented 66% of MAUs.

Family Daily Active People or DAP, defined as a registered and logged-in user who visited at least one of the Family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day, were 2.72 billion, up 15.3% year over year.

Family Monthly Active People (MAP) increased 15.4% year over year to 3.45 billion.

Asia-Pacific DAUs were up 12.1% year over year to 760 million. DAUs in the RoW, Europe, and the United States & Canada grew 10.3%, 1.3% and 0.0% to 613 million, 309 million and 195 million, respectively.

MAUs in Asia-Pacific, RoW, Europe, and the United States & Canada grew 12.5%, 10.5%, 4.2% and 2.4% to 1.23 billion, 940 million, 423 million and 259 million, respectively.

Quarter Details

Other revenues surged 146.5% year over year to $732 million, driven by strong Quest 2 holiday sales.

In the first quarter, total costs and expenses increased 24.9% year over year to $14.79 billion. Moreover, as percentage of revenues, total costs and expenses were 56.5%, down from the year-ago quarter’s 66.8%.

As percentage of revenues, marketing & sales (M&S), and general & administrative expenses (G&A) decreased 480 bps and 270 bps, on a year-over-year basis, respectively. Moreover, research & development (R&D) decreased 280 bps from the year-ago quarter.

Notably, Facebook’s employee base was 60,654 at the end of the first quarter, up 26% year over year.

Operating income of $11.38 billion increased 93.1% year over year. Operating margin was 43.5% compared with 33.2% in the year-ago quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021, cash & cash equivalents and marketable securities were $64.22 billion compared with $61.95 billion as of Dec 30, 2020.

Capital expenditures increased 20.9% year over year to $4.82 billion. Free cash flow increased 6.5% year over year to $7.82 billion in the reported quarter.

Guidance

Facebook expects advertising revenues to grow in the rest of 2021 driven by price. For second quarter of 2021, the company expects year-over-year revenue growth to remain stable or modestly accelerate compared with the growth rate in the first quarter of 2021.

Moreover, for third and fourth quarters, Facebook expects growth rate to decline sequentially.

Facebook expects changes made by Apple in its iOS 14.5 update to limit the former’s ability to track user-activity trend. The company also believes that Apple has become its biggest competitor.  

Additionally, Facebook expects total expenses for the current year to be between $70 billion and $73 billion.

Moreover, in the ongoing year, Facebook expects capital expenditures between $21 billion and $23 billion, driven by higher spending on data centers, servers, network infrastructure and office facilities.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 20.51% due to these changes.

VGM Scores

Currently, Facebook has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Facebook has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.