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 1.54%) 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. 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.
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.
