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Facebook Beats the Street Thanks to Stellar Ad Sales

By Anders Bylund - Jan 27, 2021 at 5:50PM

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Earnings jumped by 52% in the fourth quarter and free cash flow nearly doubled.

Social media giant Facebook (FB 1.39%) posted solid fourth-quarter 2020 results on Wednesday evening. The company exceeded Wall Street's expectations across the board and boosted its share buyback program by $25 billion.

Facebook's revenue rose 33% year over year, landing at $28.1 billion. GAAP earnings jumped 52% to $3.88 per diluted share. The average analyst had been forecasting earnings of roughly $3.19 per share on sales near $26.3 billion.  

The company achieved its stated goal of accelerating its ad revenue growth, lifting that key metric from 22% in the third quarter to 31% this time. Free cash flow rose 91% to $9.22 billion.

The company's active user counts continued their steady climb at low-teen to mid-teen percentage rates year over year. Facebook had 1.84 billion daily active users in December.

CFO David Wehner highlighted two macroeconomic trends that helped the company exceed expectations in the quarter. A global shift toward online commerce was accompanied by higher consumer demand for products and lower interest in services. These two tendencies combined to serve as a tailwind to Facebook's advertising growth.

A young businesswoman pumps her fist with a shout while looking at her smartphone.

Image source: Getty Images.

Looking ahead, Wehner said he expects easy year-over-year comparisons in the first half of 2021 as the company will be measuring its progress against the weak advertising environment that prevailed during the early stages of the coronavirus pandemic.

Encouraged by these results and current business trends, Facebook refueled its share repurchase program with a $25 billion injection. The previous authorization of $34 billion had $8.6 billion left, so the move brings Facebook's capacity to buy back its shares to roughly $34 billion again.

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