Facebook profit down by 9% as costs rise

  • Reuters
  • Updated: Jul 30, 2015 11:30 IST

Facebook Inc reported a fall in its quarterly profit by 9% even as its revenue beat forecasts as the social media company sharply increased spending to boost mobile revenue and future growth.

Expenses will grow 55 to 60% in 2015 from last year, including an 82% jump in the second quarter to $2.77 billion, it added.

"We're investing in the next set of services and what will be future investments like Messenger, WhatsApp and Oculus," Chief Operating Officer Sheryl Sandberg said in an interview on Wednesday after the earnings report. She was referring to Facebook's two messaging services and virtual reality headset maker Oculus Rift, whose first product for consumers has yet to be launched.

Messenger has more than 700 million users, and the app has been downloaded more than 1 billion times on Android, Google Inc's mobile operating system, Facebook said.

Over the coming months, Facebook will add new advertising formats to photo-sharing app Instagram, which was launched in Brazil, Germany and Japan in the second quarter, Sandberg added on a conference call.

Macquarie Research analyst Ben Schachter said the costs and spending met expectations. "We think the company has a lot of opportunities ahead of it so we want to see them investing quite heavily in those investments," he said.

Facebook shares fell more than 3% in after-hours trading. As of Wednesday's close of $96.99, the stock has risen 24.3% this year, valuing the company at $276.4 billion.

Facebook, the world's largest social network, continued to expand its reach, hitting 1.49 billion monthly active users as of June 30, up 13 percent from a year earlier. Of these, 1.31 billion accessed the service through mobile devices, a rise of 23%.

Daily active users increased to 968 million in June, up 17% from the same month last year.

Market research firm FactSet StreetAccount had predicted 1.48 billion monthly active users, with 1.29 billion on mobile, and 960 million daily active users.

"It's particularly impressive that users are more engaged than ever before that the percentage of monthly users who visit every day continues to grow," said Nate Elliott, an analyst with Forrester Research.

For the quarter, revenue jumped to $4.04 billion from $2.91 billion.

Net income attributable to stockholders fell to $715 million, or 25 cents per share, from $788 million, or 30 cents per share, a year earlier.

Excluding items, the Menlo Park, California-based company earned 50 cents per share. Analysts on average had expected earnings of 47 cents per share on revenue of $3.99 billion, according to Thomson Reuters.

Excluding the impact of the stronger dollar, revenue would have been about $33 million higher.

Advertising revenue grew 43% to $3.83 billion. Mobile ads accounted for 76% of that, up from 62% in the same quarter last year. The average price paid per ad rose 220% while total ad impressions, a measure of the number of times an ad is viewed, fell 55%.

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