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Facebook, Inc. Earnings: 1 Number You Need to Know

By Tim Beyers – Feb 11, 2014 at 2:00PM

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A Fool takes a closer look at Facebook's earnings report and reveals the one number that investors need to pay attention to now.

Facebook's (META 0.49%) earnings report might be even more impressive than you think, Fool contributor Tim Beyers says in the following video.

Why? Tim cites one number: 77.7, which represents gross margin for 2013 and a multiyear high for Facebook as a business. Revenue from desktop and mobile sources soared over the same period and operating cash flow more than doubled, suggesting that "likes" have become an important currency in the business of marketing and advertising. The stock rallied more than 16% following the report.

But there's also more to the margin story than mere growth, Tim says. Facebook CEO Mark Zuckerberg and team may also be benefiting from their involvement in the Open Compute Project, which purports to reimagine how we think of servers and data centers and cut costs in the process.

Here, the proof is in the numbers. By using a mixture of lower-cost parts, innovative data center designs, and homegrown software, Facebook -- like Google (GOOGL -0.94%) -- appears to have figured out how to put more processing power to work in service of users, but at a lower cost than in earlier years. The result? Gross margins expand as the network grows, a virtuous cycle that Tim says could continue for many years.

Now it's your turn to weigh in. What did you think of Facebook's earnings report? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short Facebook stock at current prices.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of Facebook and Google. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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