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Breaking Down Facebook's (FB) Q4 Earnings, Margins, Revenue & User Growth

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Facebook (FB - Free Report) shares soared over 13% in morning trading Thursday after the embattled social media giant posted better-than-expected Q4 revenue and earnings after the closing bell Wednesday. Mark Zuckerberg’s company also helped dispel worries that users would leave Facebook’s platforms amid privacy concerns.

Overview

Shares of Facebook have soared since Christmas. Still, despite Facebook’s Thursday jump, FB stock rested at roughly $169 a share through morning trading, which marked over a 22% downturn from its 52-week high of $218.62 per share. This likely indicates that FB stock has some more room to run.

Overall, Facebook showed investors and Wall Street that much of the backlash surrounding its privacy scandals and other controversies have had little impact on real Facebook users. Facebook also proved that it simply reaches too many people in an entertainment age that will soon be dominated by non-ad supported streaming platforms like Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) and soon enough Disney (DIS - Free Report) and Apple (AAPL - Free Report) , for it not to remain a digital advertising juggernaut, along with Google (GOOGL - Free Report) , for years to come.

Facebook stock tanked in 2018 on the back of margin and profit concerns more than almost anything else. The firm announced on its second-quarter earnings call that it plans to spend billions of dollars on cybersecurity and cleaning up its platforms. Facebook said these initiatives would likely cause its operating margin to fall into the mid-30s on a percentage basis over a more than two-year period.

The social media company’s operating margin fell from 57% in the year-ago period to 46% in Q4 2018. Last quarter, FB’s operating slipped from 50% to 42%. Facebook’s fiscal 2018 operating margin dipped 5% from 2017 to 45%. So clearly it doesn’t seem that we have gotten anywhere close the mid-30s yet. With that said, Facebook posted an impressive bottom-line beat and stronger-than-projected revenue.

Top & Bottom Line

Facebook’s adjusted Q4 earnings soared 65% from $1.44 a share in the prior-year quarter to $2.38 per share. This crushed our Zacks Consensus estimate that called for FB’s adjusted Q4 EPS figure to slip slightly to $2.17.

Meanwhile, Facebook’s quarterly revenues climbed 30.4% from $12.972 billion to $16.914 billion, which topped our $16.37 billion estimate. We should, however, note that this marked a slowdown from Q3’s 33% top-line expansion, which at the time broke Facebook’s streak of 12 straight quarters of growth rates above 40%.

Users

More specifically, Facebook’s revenues in the U.S. and Canada, which accounts for roughly 50% of total revenues, climbed 32% to $8.43 billion. The key region saw its monthly active users climb just over 1% from the year-ago period, which fell pretty much in line with estimates and marks the continuation of slowing user growth in FB’s most maturate and saturated market. But the revenue growth shows that advertisers cannot get enough of Facebook and its other platforms such as Instagram.

Europe, like North America, is very saturated and accounts for roughly 25% of the firm’s revenues, saw its MAUs pop nearly 3% from the year-ago period to 381 million. This region also experienced an impressive 6 million sequential climb, which is a great sign after three straight quarters of sequential declines.

Overall, Facebook’s global MAU total jumped roughly 9% from 2.13 billion in Q4 2017 to reach 2.32 billion, with much of this growth driven by the Asia-Pacific and “Rest of World.” This did mark a slowdown from Q3’s 10% climb, Q2’s 11% jump, and Q1’s 13% surge. But this is to be expected for a company that reaches roughly 30% of the global population.

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