The recent negative attention Facebook (NASDAQ:FB) has received from mishandled user data put the company in the spotlight going into its first-quarter earnings report. But heightened scrutiny couldn't suppress the company's powerful business. Revenue and earnings per share soared, and the number of monthly and daily active users continued to rise rapidly.

"Despite facing important challenges, our community and business are off to a strong start in 2018," CEO Mark Zuckerberg said about the quarter.

Here's a close look at the quarter's results.

Facebook CEO Mark Zuckerberg presenting the company's mission statement.

Facebook CEO Mark Zuckerberg. Image source: Facebook.

Q1 results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$12 billion

$8 billion

49%

Operating margin

46%

41%

500 basis points

Net income

$5 billion

$3.1 billion

63%

EPS

$1.69

$1.04

63%

Data source: Facebook first-quarter earnings release. Table by author.

Facebook's first-quarter revenue increased 49% year over year -- an acceleration from the 47% year-over-year growth Facebook posted in its fourth quarter. In addition, this growth was higher than the 47% year-over-year growth the social network saw for the full year of 2017. 

With operating expenses rising 39% during the same time frame that revenue climbed 49%, Facebook's operating margin expanded by 500 basis points year over year, helping the company see outsize growth in its net income and EPS. Net income and EPS both increased 63% year over year.

Facebook's higher operating expenses were primarily driven by a 48% increase in total full-time employees compared to the year-ago quarter. "We are focused on growing technical headcount as well as a wide variety of other groups that support the business," said CFO David Wehner during the first-quarter earnings call. 

First-quarter highlights

  • Facebook's monthly and daily active users climbed to record highs of 2.2 billion and 1.45 billion respectively. These metrics were both up 13% year over year and 3% sequentially.
  • Advertising revenue, which accounts for 99% of total revenue, was up 50% year over year.
  • Capital expenditures were $2.81 billion, up significantly from $1.3 billion in the year-ago quarter. The increase was "driven by investments in data centers, servers, network infrastructure, and office facilities," management said during Facebook's earnings call.
  • Facebook generated $5 billion in free cash flow, up from $3.8 billion in the year-ago quarter.
  • Facebook bought back $1.9 billion of its own stock during the quarter and authorized an additional $9 billion to be used for share repurchases.
  • During Q1, Facebook's price per ad and ad impressions served increased 39% and 8%, respectively. These increases were "driven primarily by feed ads on Facebook and Instagram," management said.
  • Total messages sent daily on WhatsApp and Messenger are nearing 100 billion.

The outlook

Looking ahead, Zuckerberg said the company will be "investing heavily in safety, security, and privacy." It's important to note that management said it believes it can simultaneously strengthen user privacy protection while continuing to improve its ad business.

For revenue, Facebook said it continues to expect year-over-year revenue growth rates to decelerate on a constant-currency basis throughout the year.

Just as we thought could happen, Facebook narrowed its expected range for year-over-year growth rates in full-year operating expenses to 50% to 60%. This compares to a previous guidance range of 45% to 60% growth in operating expenses. "This narrowed range reflects the significant investments we're making in areas like safety and security, content acquisition, and our long-term innovation efforts,"  Wehner said.

Overall, Facebook's first-quarter results highlighted the power of the company's momentum and reinforced its market leadership position as the world's largest social network. In addition, management's optimistic outlook and confidence in its business amid recent negative media attention are encouraging.