If the two weeks leading up to the announcement of Facebook (FB +2.63%) Q2 earnings on July 29 was any indication, investors were expecting big things -- again. And why not? Consistent top- and bottom-line growth has become the norm, but that can be a double-edged sword. Reporting continuously big quarters equates to big expectations, much as its digital advertising competitor Google (GOOG +0.53%) (GOOGL +0.37%) has faced for some time now.
Yet analyst estimates of $3.99 billion this quarter were a bit lower than what Facebook CFO Dave Wehner shared following Q1. The quarterly estimate was about a 35% jump over 2014's $2.91 billion, but Wehner cited what proved to be overly optimistic guidance of 55%, give or take, in Q2. Analysts' earnings-per-share estimates of $0.47 would have been a 12% jump year over year, and we all knew higher expenses related to Facebook's ongoing infrastructure and development spending were forthcoming.
The numbers in a nutshell
It's official: Facebook breached $4 billion in quarterly revenue for the first time in Q2, announcing sales of $4.04 billion. That's just shy of a 40% improvement over last year. Facebook also edged analysts' EPS estimates on a non-GAAP basis (excluding one-time Items), reporting $0.50 a share.
Expenses, as expected, jumped once again last quarter -- a whopping 57% compared with 2014's Q2. The impact of Facebook's spending spree was evident, considering its GAAP EPS of $0.25. However, the jump in total costs and expenses was on the low end of Wehner's guidance following the first quarter. He had forecast a 55% to 65% increase in spending this past quarter.
Looking at monthly average users, or MAUs, the sheer volume of regular Facebook users continues to impress, increasing by another 50 million to 1.49 billion. To put that number into perspective, despite being a fraction of the size, when you exclude the addition of its pseudo-SMS Fast Followers, Twitter (TWTR +0.00%) added all of 2 million MAUs last quarter. At nearly five times the volume of users as Twitter, Facebook's MAU growth in Q2 was a solid result.
Facebook's mobile usage continues to climb, too, and it now counts 1.31 billion MAUs on the go. Perhaps most impressive was its ongoing climb to 1 billion daily average users, or DAUs. A long-held concern as Facebook became omnipresent was keeping its users engaged. After all, when is enough, enough? Well, apparently people aren't yet saying "enough," as Facebook demonstrated again in Q2. It's not quite to a billion utterly engaged users, but its 17% improvement over last year to 968 million DAUs is a pretty clear indication that most Facebook users are here to stay.
A few more tidbits
The longtime angst Google has felt surrounding mobile and its impact on revenues -- in its case, declining cost-per-click rates -- may have turned a positive corner when it announced its own Q2 earnings a couple of weeks ago, citing a jump in mobile ads as a key growth driver. Since Facebook began focusing on mobile a couple of years ago, it's enjoyed steady improvement with each successive quarter -- and Q2 was no exception.
Of Facebook's $3.83 billion in advertising revenues last quarter, a full 76% of it came from mobile spots. That's up from just 62% a year ago, and 73% sequentially. Net cash from operations improved about 40% year over year, helping to boost Facebook's already strong balance sheet to over $14 billion in cash and equivalents, along with marketable securities, compared with slightly over $11 billion just six months ago.
Based on the somewhat muted after-hours trading results – Facebook is down about 2% as of this writing -- there appears to be some malaise surrounding Facebook's second-quarter results. Good news for long-term investors, because that means Facebook stock probably won't fly through the $100-per-share barrier: yet.
