Earnings Preview: Facebook's mobile ad growth

NEW YORK (AP) -- Investors will likely focus on mobile advertising growth at Facebook Inc. when the social media company reports first-quarter results on Wednesday after the stock market closes.

WHAT TO WATCH FOR: Sterne Agee analyst Arvind Bhatia says Facebook is "aggressively moving forward with its transition to mobile." The company only started showing advertisements on its mobile apps in early 2012. This year research firm eMarketer estimates that more than 27 percent of Facebook's worldwide advertising revenue will come from mobile. By 2014, this is expected to grow to 38 percent.

Bhatia said in a note to investors that while Facebook's quarterly results "will likely be volatile," he remains upbeat on the company's direction and growth trajectory. He expects Facebook's mobile advertising revenue will rise to $360 million, up 18 percent from the fourth quarter of 2012. He thinks that less than $380 million "could disappoint" Wall Street.

Facebook is also expected to update its user numbers, including the number of people who access it using a mobile device. Bhatia expects that this will amount to 65 percent of all Facebook users, up from 64 percent in the fourth quarter.

Wedbush analyst Michael Pachter expects results to meet or exceed Wall Street's views, with earnings per share growth driven by operating expenses below levels that Facebook implied during its fourth-quarter earnings call in late January. The company had said it expects operating costs to increase by around 50 percent in 2013. Pachter thinks it won't be that much.

"By providing such high-level guidance, management provides itself with the flexibility to still deliver a positive earnings result through (operating expense) control even if revenue lags expectations," Pachter said in a note to investors.

WHY IT MATTERS: Facebook is the world's No. 1 social media company, with more than 1 billion users. Its results can help assess the health of the overall online and mobile advertising environment.

WHAT'S EXPECTED: Analysts, on average, are expecting earnings of 12 cents per share on revenue of $1.44 billion, according to a poll by FactSet.

LAST YEAR'S QUARTER: Still a privately held company at the time, Menlo Park, Calif.-based Facebook earned 9 cents per share on revenue of $1.06 billion.