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Why Facebook, Inc. Stock Jumped Thursday

By Daniel Sparks – Jul 27, 2017 at 12:06PM

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Facebook's surging revenue and earnings have investors optimistic about the stock on Thursday. Here's a close look at what's driving Facebook's big move in its stock price.

What happened

Shares of Facebook (META 1.98%) rose as much as 6% on Thursday, following the company's better-than-expected second-quarter earnings release. The stock is up about 5.3% as of 11 a.m. EDT.

So what

Not only were Facebook's financial results better than analysts were expecting, but the company moderated its outlook for expense growth for the rest of the year.

Facebook CEO Mark Zuckerberg presents 10-year plan at F8 conference in 2016

Facebook CEO Mark Zuckerberg. Image source: Facebook.

Facebook's second-quarter revenue was $9.32 billion, up 45% from the year-ago quarter. On average, analysts were expecting revenue of $9.2 billion. Facebook's EPS was $1.32, up an incredible 71% year over year. This crushed a consensus analyst estimate for EPS of $1.13.

Meanwhile, Facebook narrowed its expense and capital expenditure guidance for the full year toward the lower end of its previously provided ranges. Facebook now expects expenses in 2017 to increase 40% to 45%, down from a previous range of 40% to 50%. Management also said it expects its capital expenditures to be at the low end of its $7 billion to $7.5 billion forecast for the full year.

Now what

Despite this optimistic news on Facebook's financials for the quarter, management was adamant that it still expects its revenue growth to come down meaningfully in the second half of the year as rising ad load becomes less of a significant revenue driver for the company. So investors should brace themselves for revenue growth to decelerate more rapidly in the coming quarters.

Daniel Sparks owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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