Why Facebook’s 3Q14 earnings could positively surprise you

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Facebook’s revenue has grown at a 60%+ rate over the last few quarters

Facebook (FB) has become one of the most important players in the Internet industry. Its revenue growth remains strong. As the chart below shows, Facebook’s year-over-year revenue growth rate has been upwards of 60% in the last few quarters. Facebook believes that as the yearly comparison becomes difficult due to its larger revenue base, its revenue growth rate will slow considerably during the rest of 2014.

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But Facebook’s revenue growth in 3Q14 could positively surprise you as the company continues to make the right strategic moves to grow its business. Facebook is expected to announce its third quarter earnings on October 28. The point you need to note here is that Facebook’s stock hasn’t moved much during the last three months. Any positive earnings surprise could make the stock gain.

Facebook revenue growth rate

Facebook’s growth is driven by its increasing presence on mobile devices

Earlier in this series, we discussed how the mobile advertising market is expected to grow the fastest among all other modes of the digital advertising market. Mobile ad revenue made up 62% of the company’s overall ad revenue in the second quarter of 2014 compared to 41% of overall ad revenue in the corresponding quarter a year ago. Only Twitter (TWTR) derives more revenue from mobile devices than Facebook.

In terms of app use on mobile devices, Facebook and Google (GOOG)(GOOGL) apps have taken seven of the top eight positions in terms of unique visitors in the U.S. on mobile devices, which we discussed in a Market Realist article titled Why Facebook and Google dominate in terms of mobile app use. Only the Pandora (P) app managed to squeeze into the list of top eight players other than Facebook and Google.

Plus, in the previous part of this series, we discussed a number of initiatives that Facebook took last quarter to take business away from Google. All these factors present Facebook in a favorable light.

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