Please ensure Javascript is enabled for purposes of website accessibility

Facebook Earnings Just Obliterated Expectations

By Daniel Sparks - Updated Apr 28, 2021 at 5:58PM

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

Net income nearly doubled as advertisers ramped up their spending across the company's social networks.

It's already been clear in recent weeks that digital-advertising companies are benefiting from a surge in ad spend from marketers. Starting with better-than-expected results from Snap last week, Google parent Alphabet then confirmed this bullish narrative on Tuesday with results that crushed analyst estimates.

But Facebook's (META -0.76%) results may be the icing on the cake. Its first-quarter results absolutely obliterated expectations. Here's a closer look at the social-network company's stellar start to 2021.

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

Facebook CEO Mark Zuckerberg. Image source: Facebook.

Surging revenue and soaring profits

Facebook's total revenue climbed 48% year over year to $26.2 billion. Analysts, on average, were expecting the company to grow its revenue 33.5% year over year to $23.7 billion.

The main driver of this growth, of course, was Facebook's advertising business. Total advertising revenue grew 46% year over year to $25.4 billion. The company's ad business was driven by a 30% year-over-year increase in average price per ad served on its platform and a 12% increase in ad impressions.

But investors shouldn't count out the social network's "other" revenue, which soared 146% year over year to $732 million. The small but notable segment includes sales from virtual-reality equipment, e-commerce integrations, and more.

Combining Facebook's strong top-line performance with its scalable business model led to outsized gains in profitability during the quarter. Facebook's net income skyrocketed 94% year over year, increasing from $4.9 billion in the year-ago quarter to $9.5 billion. Helping this earnings growth was Facebook's expanding operating margin, which increased from 33% in the first quarter of 2020 to 43% in the first quarter of 2021.

Social media notification icons

Image source: Getty Images.

Expect more of the same in Q2

Looking ahead to the current quarter, Facebook CFO David Wehner said investors should expect its year-over-year revenue growth rate for the period "to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020."

Facebook is, indeed, up against some easy comparisons in Q2. The company's revenue in the second quarter of 2020 only increased 11% year over year, as many marketers paused their ad campaigns or reduced ad spend. Nevertheless, Facebook's guidance for 48% revenue growth or greater in Q2 is ahead of the consensus analyst estimate for 45.9% growth during the period. 

Management reaffirmed its previous outlook for revenue growth rates to decelerate in the third and fourth quarter of this year as Facebook laps tougher comparisons.

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.
META
$160.03 (-0.76%) $-1.22
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,174.75 (-0.21%) $-4.51
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,181.62 (-0.27%) $-5.83
Snap Inc. Stock Quote
Snap Inc.
SNAP
$13.17 (0.30%) $0.04

*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 analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

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.