The 12% stock price jump since LinkedIn (NYSE:LNKD) announced earnings Feb. 5 is even more impressive considering it wasn't followed by short-term traders taking quick gains. That's generally a sign that there is a lot more than momentum driving a stock price, which is certainly the case with LinkedIn. Strong revenue growth for the quarter, as well as the year, would seem to warrant all the good tidings.

To be sure, last year's positive results gave LinkedIn shareholders something to cheer, but in a world of "what have you done for me lately," the question is, can CEO Jeff Weiner and team continue to deliver? Based on projections for Q1 2015 and the full year, continued revenue growth appears to be in the cards. But there are certainly challenges ahead, including managing sky-high expenses, continuing to diversify revenue sources, and competition on the horizon. But LinkedIn is making positive strides, and that should continue in the foreseeable future.

A quick recap
Based on LinkedIn's forecast, Q4 was expected to be solid. CFO Steve Sordello raised guidance as part of LinkedIn's Q3 earnings announcement, suggesting the year-end quarter would generate in the $600 million to $605 million range, or about 35% above the year prior, and for all of 2014 sales would be $2.17 billion, give or take. Turns out, Sordello was wrong on both accounts.

The projected 35% jump in revenues in Q4 would have been good in and of itself, which makes the $643 million LinkedIn actually delivered that much more impressive. The 44% improvement in sales topped analyst forecasts as well as Sordello's, and LinkedIn's non-GAAP (excluding one-time items) earnings-per-share of $0.61 obliterated 2013's Q4 "paltry" $0.39.

Including last quarter's one-time expenses, LinkedIn's earnings were $0.02 a share, compared to $0.03 in the year-ago quarter. Why such a big disparity in GAAP vs. non-GAAP earnings? Expenses related to acquisitions like the $175 million deal for advertising solutions provider Bizo were partly to blame, as were investments in LinkedIn's sales team, product development, and infrastructure.

The elephant in the room
As yet, LinkedIn has little to no direct competition. Sure, there are other networking sites, but LinkedIn fills a niche with its focus on professionals and employers. But Facebook (NASDAQ:FB) is taking steps to change all that. Facebook at Work is being tested by a handful of companies as an internal communications and data-sharing solution.

The question is: will Facebook stop there, or branch out into LinkedIn's world, particularly if Facebook at Work gains in popularity? If it does, Facebook's sheer size and user familiarity would make it a formidable competitor, almost immediately. As one industry pundit put it, "Facebook is really the only other social media platform that's a threat to LinkedIn's empire." And he's right.

Where does LinkedIn go from here?
As for today, In addition to its outstanding revenues and non-GAAP earnings results, LinkedIn is beginning to make headway in diversifying sales across its three primary business units: Premium Subscriptions, Marketing, and Talent Solutions. The concern is that too big a piece of LinkedIn's revenue pie was derived from its talent solutions unit. And while that's still the case, last quarter saw a slight improvement and could be indicative of things to come.

Marketing solutions in particular is beginning to carry more of LinkedIn's revenue load, accounting for 24% of last quarter's sales, compared to 22% in 2013's Q4. Not a huge shift, but plans to ramp up investment in its sales team combined with integrating Bizo into the ad solutions mix should keep LinkedIn's revenue diversification efforts moving in the right direction.

Member growth was another strong point last quarter and LinkedIn now boasts 347 million members, 15 million more than at the end of Q3. Add to that new tools to ramp up user content, a strong international reach, and a ten-fold increase in job listings, it's easy to see why LinkedIn investors are excited.

Based on both past results and expectations for the remainder of the year, LinkedIn is clearly on the right path. Keep in mind, however, that GAAP earnings will be pressured for some time as LinkedIn continues to spend on overhead. Last year's nearly 50% increase in total expenses hurt LinkedIn's bottomline, and that's not changing anytime soon. But the investments LinkedIn is making today will pay dividends for years to come, which should be music to the ears of long-term growth investors.

 

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and LinkedIn. The Motley Fool owns shares of Apple, Facebook, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. 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.