Facebook (FB) earnings Q1 2020

Facebook shares rose as much as 10% in after-hours trading on Wednesday after the company announced its first-quarter results. Even though Facebook said it saw a steep decline in ad revenue in March due to the coronavirus pandemic, it also said the first few weeks of April began to show “stability,” injecting optimism into the stock.

Here’s what Facebook reported:

  • Earnings (EPS): $1.71
  • Revenue: $17.74 billion
  • Daily active users (DAUs): 1.73 billion
  • Monthly active users (MAUs): 2.6 billion
  • Average revenue per user (ARPU): $6.95

Analysts surveyed by Refinitiv expected $1.75 in earnings per share and $17.41 billion in revenue for the first quarter. However, comparing Facebook’s results against analysts’ estimates is not straightforward given the coronavirus pandemic’s impact on economies around the world. 

Facebook CEO Mark Zuckerberg said he remains very concerned that the economic fallout of the coronavirus pandemic will last longer than people are currently anticipating. 

“While there are massive societal costs from the current shelter-in-place restrictions, I worry that re-opening certain places too quickly before inaction rates have been reduced to very minimal levels will almost guarantee future outbreaks and worse longer-term health and economic outcomes,” Zuckerberg said during the company’s earnings call Wednesday night.

Facebook said it is now seeing signs of stabilization after seeing an initial steep decrease in advertising revenue in March due to Covid-19. Early data for April looks more promising, the company said. This echoes what Google saw on Tuesday with its own advertising business. However, CFO David Wehner is remaining cautious on the second quarter. 

“We know economists are calling broadly for a GDP contraction in Q2 that’s pretty substantial globally,” Wehner told CNBC’s “Closing Bell.” “We know that advertising tends to be very sensitive to the macroeconomic climate. We really have a very cautious outlook on how things are going to develop.”

“We’re not immune from this crisis,” Wehner said. 

The company’s revenue came in at $17.74 billion, up nearly 18% from the $15.08 billion the company reported in the first quarter of 2019.

Facebook said it counts 2.99 billion monthly users across its family of apps, compared to 2.89 billion in the previous quarter. This metric is used to measure Facebook’s total user base across its main app, Instagram, Messenger and WhatsApp.

In the U.S. and Canada, Facebook’s user base rose to 195 million daily active users from 190 million a quarter earlier. Its user base in Europe increased to 305 million from 294 million daily active users in the prior quarter.

Facebook’s “Other” revenue came in at $297 million for the quarter, up 80% compared to last year. This includes sales of Oculus virtual reality headsets and the Portal video-chatting devices, which were sold out from Facebook’s website and retailers like Best Buy in March. The increase in Other revenue was primarily driven by sales of Oculus products, Wehner said. 

Zuckerberg also highlighted that Facebook is now seeing 800 million daily active users engaging with Facebook and Instagram livestreams. 

“Because no one is planning physical events right now, live streaming has become the primary venue for many events,” Zuckerberg said.

Facebook capital expenditures for 2020 are now expected to be in the range of $14 billion to $16 billion, down from the original expectation of $17 billion to $19 billion, Wehner said. This is a result of a significant decrease in Facebook’s construction efforts due to shelter-in-place orders. This reductions will be deferred to 2021, Wehner said. 

The company reported its cash and cash equivalents at $60.29 billion. Facebook’s traditionally high margins has created a financial position that allows the company to continue building new products and making bets like its $5.7 billion investment in India’s Jio Platforms last month, Zuckerberg said.

“I’ve always believed that in times of economic downturn the right thing to do is to keep investing and building the future,” Zuckerberg said. 

Zuckeberg explained the the investment in Jio Platforms relates to the company’s JioMart strategy to get millions of small businesses online, communicating and processing payments through WhatsApp. 

“That’s a great, very large example of how we can wire up and help small businesses in the country where we have the largest WhatsApp community,” he said. “But certainly all the products and technology that we’re building to enable that partnership are going to be things we’re going to want to do around the world.”

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