Facebook Records 11% Q2 Revenue Growth As Its Community Hits 3.1 Billion

Facebook Records 11% Q2 Revenue Growth As Its Community Hits 3.1 Billion

Facebook made its second quarter report showing slow revenue and increased number of users. Its stock rose more than 6% in extended trading while user growth recorded a new height of over 3 billion.

Its social media community saw a surge induced by the pandemic and ensured the quarter ended on high.

“This was a strong quarter for us, especially compared to what we expected at the start,” Said Facebook CEO, Mark Zuckerberg. “There are now more than 3.1 billion people using our services every month to stay connected and more than 180 million businesses who use our tools to connect with customers. We also had more than 9 million active advertisers across our services as many shifted their businesses online.”

Though the second quarter revenue growth has been the slowest since the 2012 IPO, it beats projections by analysts. The company said the surge in number of users compelled advertising that resulted in the growth.

“We are seeing signs of normalization in user growth and engagement as shelter in-place measures have eased around the world, particularly in developed markets where Facebook’s penetration is higher,” the company said in a statement.

As of Thursday’s close, Facebook shares were up 14% this year, to top the 0.5% gain for the S&P 500. The stock topped $252 in extended trading, above its record intraday high of $250.15 earlier this month. CNBC reported.

The Silicon Valley giant recorded revenues from other sources at the tone of $366 million for the Q2. The sources include the sales of devices such as the Oculus virtual reality headsets and the portal video-chatting devices.

Facebook’s cash and cash equivalents and marketable securities were $58.24 billion as of July 30, 2020, after paying $5.8 billion for a stake in Jio Platforms Limited.

The company made a total capital expenditure of $3.36 billion for the Q2 2020, which includes principal payments on finances and leases.

The pandemic unleashed unprecedented strains on businesses which affected ad revenues and put its profits in doubt, but Facebook scaled the hurdle by providing virtual platforms for users separated by government placed restrictions to interact.

“We’re glad to be able to provide small businesses the tools they need to grow and be successful online during these challenging times,” said Zuckerberg. “And we’re proud that people can rely on our services to stay connected when they can’t always be together in person.”

Facebook daily active users (DAUs), were 1.79 billion on average for June 2020, an increase of 12% year-on-year, while the monthly active users (MAUs) were 2.70 billion, with year-on-year increase of 12%.

Family daily active people (DAP), was 2.47 billion on average for June 2020, an increase of 15% year-on-year. Family monthly active people (MAP), was 3.14 billion, an increase of 14% year-on-year.

However, the ease of restrictions means the number of users will decline in coming months. Facebook said it expects the number of DAUs and MAUs to be flat or slightly down in most regions in the third quarter of 2020 compared to second quarter 2020, as shelter-in-place restrictions continue to ease.

Revenue generation for the third quarter will likely plummet as a result of “boycott Facebook” campaign, though it is expected to be on par with the growth rate of the first three weeks of July, which is 10%.

Apart from the impact of certain advertisers boycotting Facebook, and relaxation of the restrictions which will mean more physical interactions, there are other two factors that paint the future gleam for the platform.

They are macroeconomic uncertainty, including the pace of recovery and the prospects for additional economic stimulus; headwinds related to ad targeting and measurement, including the impact of regulation, such as the California Consumer Privacy Act, as well as headwinds from expected changes to mobile operating platforms, which is expected to increase significantly as the year progresses.

Facebook alongside other big tech companies including Amazon, Apple and Google faced the congress on Wednesday over allegations of monopoly. The companies have been accused of stifling competition with financial muscle, an allegation they all denied. But the investigation seems not to have ended as new information reveals the giants were going after competitors.

An email from Zuckerberg to his chief financial officer David Ebersman, before the acquisition of Instagram noted the Facebook founder saying: “Instagram can hurt us meaningfully without becoming a huge business.” This suggests there is intent to cripple platforms perceived as threats, a development the congress would want antitrust agencies to look into.

However, Zuckerberg said Facebook’s growth has been as a result of innovative products and services that improve lives and the platform will continue to create more products for people and businesses.

“As I told congress yesterday: I am proud of the services we build and how they improve people’s lives,” he said.

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