Facebook crushed analysts’ estimates
This is proving to be a great year for Facebook (FB) as the social media giant posted yet another stellar quarter, crushing all estimates. Facebook’s 2Q16 adjusted EPS (earnings per share) of $0.97 easily surpassed the analysts’ estimate of $0.82. It nearly doubled when compared with 2Q15.
On average, Facebook outperformed the consensus estimate in the trailing four quarters by 17.1%, thanks to its strong advertising revenues and growing number of users. The chart below reflects the company’s earnings surprise history.
On the contrary, another social media giant, Twitter (TWTR), is largely disappointed with its 2Q16 results. Twitter witnessed the slowest growth in its top line since it went public as stagnating user growth kept brand marketers away from its platform.
Strong ad revenue and cost efficiency boosted bottom line
The company’s advertising revenue rose by 63% YoY (year-over-year) to $6.2 billion in 2Q16 while mobile advertising revenue jumped by 81% YoY. The company noted that user growth, time spent, and ad load—coupled with increased demand from advertisers—led to the phenomenal growth in the top line. This, in turn, boosted the bottom line results.
Additionally, Facebook was able to trim it costs, which benefited the company’s bottom-line results. In 2Q16, Facebook’s adjusted total costs and expenses as a percentage of revenue fell by 340 basis points YoY to 41.5%, driven by a relative decline in each cost driver.