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A Look at Facebook’s H1 2018 Performance

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What drove Facebook’s revenue growth in H1 2018?

Driven by its advertising revenues, Facebook’s (FB) revenues grew 45.0% to $25.2 billion in the first half of 2018. Mobile advertising revenues constituted 91.0% of the company’s second-quarter revenues, compared to 87.0% in the second quarter of 2017. Facebook’s daily active users and monthly active users improved by 11.0% each to 1.5 billion and 2.2 billion, respectively, in June.

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How Facebook’s profit margins have improved in H1 2018

Facebook’s cost of revenues rose 73.0% to $4.1 billion in the first half of 2018. Higher operational expenses associated with data centers and technical infrastructure drove the company’s costs. These costs ate away 14.0% of the company’s revenues in the first half of 2017, compared with 16.0% in the first half of 2018.

Stronger revenues led to gross profit growth of 41.0% to $21.1 billion in the first half of 2018. However, its gross profit margin decreased from 86.0% in the first half of 2017 to 84.0% in the first half of 2018.

Operating expenses and income

Facebook’s operating expenses rose 35.0% to $9.7 billion in the first half of 2018, driven by higher research and development expenses. The company’s operating expenditures consumed 42.0% of its revenues in the first half of 2017, compared to 39.0% in the first half of 2018.

Higher revenues, gross profit growth, and cost controls translated into 46.0% growth in income from operations for the first half of 2018. Facebook’s income from operations totaled $11.3 billion in the first half of 2018. Its operating margins remained at 45.0% in the first half of 2017 and the first half of 2018.

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Interest and other non-operating income comprised 1.0% of Facebook’s revenues in the first half of 2017 and the first half of 2018. Its net income grew 31.0% to $10.1 billion in the first half of 2018. Its net margin declined from 44.0% in the first half of 2017 to 40.0% in the first half of 2018. Its EPS improved by 31.0% to $3.40 in the first half of 2018.

FAANG peers

Let’s look at the cost of revenues and sales margins of the other FAANG stocks. Apple (AAPL) had a cost of sales margin of 62.0% in the nine months ended June 30. Amazon (AMZN) had a cost of sales margin of 59.0% in the first half of 2018. In the first half of the year, Netflix (NFLX) had a cost of revenue margin of 59.0%, and Alphabet’s (GOOG) cost of revenue margin was 43.0%. 

Alphabet (GOOG), Facebook, Amazon, and Netflix (NFLX) had operating expense margins of 42.0%, 39.0%, 36.0%, and 29.0%, respectively, in the first half of 2018. Apple had an operating expense margin of 11.0% in the nine months ended June 30.

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