Facebook, Inc. Earnings: 1 Number You Need to Know

Facebook's (NASDAQ: FB  ) earnings report might be even more impressive than you think, Fool contributor Tim Beyers says in the following video.

Why? Tim cites one number: 77.7, which represents gross margin for 2013 and a multiyear high for Facebook as a business. Revenue from desktop and mobile sources soared over the same period and operating cash flow more than doubled, suggesting that "likes" have become an important currency in the business of marketing and advertising. The stock rallied more than 16% following the report.

But there's also more to the margin story than mere growth, Tim says. Facebook CEO Mark Zuckerberg and team may also be benefiting from their involvement in the Open Compute Project, which purports to reimagine how we think of servers and data centers and cut costs in the process.

Here, the proof is in the numbers. By using a mixture of lower-cost parts, innovative data center designs, and homegrown software, Facebook -- like Google (NASDAQ: GOOGL  )  -- appears to have figured out how to put more processing power to work in service of users, but at a lower cost than in earlier years. The result? Gross margins expand as the network grows, a virtuous cycle that Tim says could continue for many years.

Now it's your turn to weigh in. What did you think of Facebook's earnings report? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short Facebook stock at current prices.

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  • Report this Comment On February 11, 2014, at 3:08 PM, GrkNick wrote:

    In light of the recent development accusing Facebook (FB) of hosting "Like farms" (https://www.youtube.com/watch?v=oVfHeWTKjag), any thought whether this might deflate the perception of Likes becoming a marketing currency? If so, how scared should we be with our FB positions considering FB's current massive growth? Is this a development that has larger long-term effects such that we should continue with our current short-term strategies with the issue?

  • Report this Comment On February 12, 2014, at 9:15 AM, TMFMileHigh wrote:

    @GrkNick,

    Fascinating stuff. Thanks *very* much for bringing it to my attention.

    You're right that this is a real risk to the long-term veracity of the business model, though I suspect there are other stories of Facebook connecting people and businesses in ways that weren't before possible -- and that, too, has value.

    Sending a note to Facebook PR this morning since this seems like a story that deserves further scrutiny.

    Foolish best,

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

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