Facebook Inc. (FB: Quote) with its first results since going public in May, Thursday reported a loss for the second quarter, hurt mostly by share based compensation expenses related to the IPO.
Nonetheless, excluding special items, the social networking giant's adjusted profit improved from last year, on higher revenues. Earnings were in line with analysts' estimates, while revenues exceeded expectations. However, investors were disappointed with slowing growth, sending Facebook's shares down 11 percent in after-hours trade.
The stock lost over 8 percent after Zynga Wednesday reported second-quarter earnings that missed estimates and also lowered its full year outlook. Facebook generates about 15 percent of its revenues from Zynga, through games likes Farmville.
Facebook's revenues for the second quarter grew 32 percent to $1.18 billion from $895 million last year. Wall Street analysts on a consensus estimated revenues of $1.15 billion for the quarter.
Lately, market experts have indicated doubts about Facebook's ability to grow its revenues as in past. Facebook now faces the challenge of capitalizing the growing number of Facebook users on phones and monetize it. The company admits that users now log in more through their phones than desktops, and it now requires to find a solution to make more money out of mobile advertising. Active monthly users through mobile were 543 million as of June 30, 2012, an increase of 67 percent year-over-year.
The company also faces the challenge of holding on to the loyalty of its users amidst increased competition from Twitter and Google (GOOG: Quote). Facebook currently boasts of about 955 million monthly active users, with about 552 million of them logging in every day.
Mark Zuckerberg, founder and chief executive officer, said, "Our goal is to help every person stay connected and every product they use be a great social experience. That's why we're so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends."
Facebook's ad revenues increased 28 percent to $992 million. This translates to 84 percent of total revenue.
Menlo Park, California-based Facebook reported second-quarter net loss attributable to shareholders of $157 million or $0.08 per share, compared to net income of $159 million or $0.11 per share last year.
Adjusted net income for the quarter rose to $295 million or $0.12 per share from $285 million or $0.12 per share last year. On average, 31 analysts polled by Thomson Reuters expected earnings of $0.12 per share for the quarter. Analysts' estimates typically exclude special items.
Second-quarter costs and expenses surged 295 percent to $1.93 billion, driven primarily by the $1.3 billion of share-based compensation and related payroll tax expenses. Excluding the special items, costs and expenses rose to $669 million from $418 million last year.
Operating margin was negative 63 percent for the second quarter, compared to 45 percent last year. Adjusted operating margin dropped to 43 percent from 53 percent last year.
Facebook shares initially rose over 4 percent following the announcement, but is currently trading at $23.79, down $3.08 or 11.38%.
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by RTT Staff Writer
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