Facebook, Inc.'s Q2 Earnings in 3 Must-See Charts

Like clockwork, Facebook beat expectations for the eighth quarter in a row. See the social network's monstrous performance in these three charts.

Jul 24, 2014 at 1:02PM

Facebook (NASDAQ:FB) stock soared to an all-time high at market opening today, and was trading just over $76 in late morning. The jump was fueled by the company's second-quarter financial report that beat expectations on both revenue and earnings.

The consensus analyst estimate was for earnings per share of $0.32 and revenue of $2.81 billion. Earnings and revenue instead came in meaningfully higher at $0.42 per share and $2.91 billion, respectively.

Zuckerberg Facebook

Facebook CEO Mark Zuckerberg (right) in his office. Image source: Facebook.

But investors will need to look deeper than the second-quarter EPS and revenue figures to see why the Street is so confident in the social network. It's more evident than ever that Facebook is a money-making machine. Check out these three charts to see the bigger picture of how Facebook is executing proficiently on the most important metrics that drive its business.

The rapid shift to mobile continues
Mobile is still the big story for the company. Mobile daily active users, or DAUs, accounted for 79% of Facebook's total DAUs in the second quarter. That percentage is up from 76% in the first quarter. Facebook's mobile-only monthly active users, or MAUs, hit 399 million, up from 341 million.

This shift has taken the percentage of Facebook's ad revenue from mobile to an all-time high.

Facebook Mobile Revenue Q

Data for chart retrieved from SEC filings.

What's most intriguing about this chart is that it was just over a year and a half ago that 0% of Facebook's advertising revenue came from mobile.

Revenue continues to grow robustly
Facebook's mobile ads are more engaging for users, so the shift toward mobile has driven demand for the company's ad units much higher. This is giving the social network increasing pricing power per ad unit, helping advertising revenue soar as Facebook's ad revenue shifts to mobile.

Facebook Ad Revenue Growth Rates Q

Data for chart retrieved from SEC filings.

Operating income growth is mind-boggling
When Facebook can increase the price per ad by 123% while ad impressions only decline by 25% from the year-ago quarter, this results in some serious scale. Thanks to Facebook's scalable business model and growing pricing power, the company is still growing operating income by triple digits.

Facebook Operating Income Growth Q

Data for chart retrieved from SEC filings.

While Facebook's continued performance at levels beyond expectations certainly provides more evidence that it has more growth ahead, and that its business may be more scalable than investors had imagined when shares went public at $38 per share, Mr. Market seems to already have taken this into consideration. On the other hand, is Mr. Market simply placing a well-deserved rosy premium on future growth prospects and a sustainable lucrative business model?

Is there any action investors should take? Given the enormously optimistic outlook priced into the stock, investors would likely be best only buying Facebook shares on a meaningful sell-off. On the other hand, the social network's business performance is another reason to hold for investors who already own shares. Should investors consider selling this winner? No way.

Leaked: Apple's next smart device (warning, it may shock you)
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Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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