Please ensure Javascript is enabled for purposes of website accessibility

Facebook Beats the Street Thanks to Stellar Ad Sales

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$196.23 (1.39%) $2.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.