Mark your calendar. LinkedIn (NYSE:LNKD.DL) has just given its third-quarter earnings release a date: Thursday, October 29. With shares down about 15% since it last reported results, investors will be looking for the release to bolster investor confidence.
What to expect
Here are some of the key items investors should focus on when LinkedIn reports third-quarter results.
1. Lynda.com. Focus during the company's third-quarter earnings call will undoubtedly shift to its recent acquisition of Lynda.com, an online learning company that sells subscriptions to a library of educational videos. With LinkedIn spending around $1.5 billion in cash and stock to acquire the online service, investors are holding the acquisition to high standards.
Look for insight into whether management is still as confident in the "transformational" opportunity provided by Lynda.com in helping LinkedIn tap into a $30 billion learning and development market.
2. Engagement. Beyond ensuring LinkedIn's total member base continues to grow, investors should also check in on user engagement.
The best way to keep tabs on the trends of LinkedIn's user engagement is to ensure that member page views are increasing faster than unique visiting members. While both member page views and unique visiting members are important in their own right, a trend of faster-growing member page views suggests more unique visiting members are not just visiting -- but are also engagingly more frequently.
During Q2, engagement was particularly notable. During the same period of a 15% year-over-year increase in LinkedIn's reported unique visiting members, its member page views jumped 40%.
3. China. Perhaps the most overlooked catalyst for LinkedIn's business is its market opportunity in China. Since launching in the country, the company's user base has accelerated rapidly. Between February of last year and July of this year, LinkedIn's China user base more than doubled from 4 million to 10 million.
Longer term, LinkedIn CEO Jeff Weiner has said he believes LinkedIn could attract around 140 million knowledge workers in the country. For perspective, this figure amounts to more than one-third of the social network's total member base of 380 million today.
4. Display ad challenges. LinkedIn's marketing solutions segment, which represents about 20% of revenue, could see rapidly decelerating year-over-year growth during Q3 compared to its 32% growth reported during Q2. While its Sponsored Updates, which fall under LinkedIn's marketing solutions segment, remain strong, management noted during its second-quarter earnings call that its premium display ad business is facing headwinds "in light of deteriorating secular trends." And with management noting specifically that it wouldn't be focusing on display ads, investors should expect more challenges with display ads ahead.
Investors should look for an update from management on its marketing solutions segment.
Ahead of LinkedIn's third-quarter results, analysts expect the company to report revenue and non-GAAP EPS of $755 million and $0.46, representing a 33% increase and a 12% decrease from the year-ago quarter, respectively. Expectations for a year-over-year decline in non-GAAP EPS reflect a continuation of LinkedIn's headwinds in display ads and the company's higher spending on long-term growth initiatives.
Analyst expectations are slightly higher than LinkedIn's own guidance for third-quarter revenue between $745 million and $755 million and non-GAAP EPS of $0.43.
LinkedIn will announce its third-quarter financial results after market close on October 29. A live webcast of its conference call to discuss third-quarter results will take place at 5:00 p.m. ET.