Facebook Drives Q2 Revenue Up 11%, Tops Wall Street Estimates Despite COVID Uncertainty

Todd Spangler
·3 min read

Facebook keeps growing at healthy clip: The social giant beat analysts’ financial estimates the second quarter of 2020, on both the top and bottom line, as it netted around 100 million new monthly users in the period for its flagship service.

Facebook monthly active users were 2.70 billion as of June 30, 2020, an increase of 12% year-over-year and up from 2.6 billion in Q1.

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Total revenue was $18.69 billion, up 11%, and net income came in at a whopping $5.18 billion (or diluted earnings per share of $1.80). Wall Street consensus estimates for Facebook’s Q2 were for revenue of $17.4 billion and EPS of $1.39. The company’s revenue growth in Q2 2019, for comparison, was 28%.

“We’re glad to be able to provide small businesses the tools they need to grow and be successful online during these challenging times,” Facebook CEO Mark Zuckerberg said in announcing the results. “And we’re proud that people can rely on our services to stay connected when they can’t always be together in person.”

The company’s shares popped more than 8% in after-hours trading on the Q2 earnings.

Facebook said its business “has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook.”

In the first three weeks of July, year-over-year ad revenue growth rate was approximately in line with Q2 2020 year-over-year ad revenue growth rate of 10%. Facebook expects the ad revenue growth rate for the third quarter of 2020 will be roughly similar to this July performance. Factors contributing to the Q3 outlook included continued macroeconomic uncertainty, and “the impact from certain advertisers pausing spend on our platforms related to the current boycott, which is reflected in our July trends.”

The company said the growth of daily and monthly active users in Q2 reflected “increased engagement as people around the world sheltered in place and used our products to connect with the people and organizations they care about.” More recently, Facebook is seeing “signs of normalization” in user growth and engagement — and as such, the company expects its active user base to be flat or slightly down in most regions in the third quarter of 2020 compared with Q2.

Facebook reported earnings a day after Zuckerberg — along with the CEOs of Amazon, Google and Apple — appeared before the House Antitrust Judiciary committee to answer questions about their alleged anticompetitive practices.

In the virtual hot seat, Zuckerberg faced accusations, which were backed up with private communications obtained by the House subcommittee, that Facebook moved to acquire Instagram and WhatsApp primarily to eliminate potential competitors. Regarding Instagram, Zuckerberg responded that “I’ve always been clear that we viewed Instagram as both a competitor and as a complement to our services” and claimed his company’s $1 billion deal for Instagram has been “an American success story” because Facebook has been able to grow the app.

Meanwhile, Facebook has been the target of the #StopHateForProfit ad boycott, which has been joined by more than 1,000 companies that said they suspended advertising with the social-media company in an attempt to coerce Facebook into dealing more forcefully with hate speech and harassment. Those have included Disney, Unilever, Coca-Cola, Microsoft, Target, Starbucks, Verizon and Acura.

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