Facebook's (FB) Q3 Earnings Beat Estimates, Revenues Up Y/Y Facebook's (FB) third-quarter 2021 performance gains from robust ad revenues and user-base expansion in international markets.

Facebook's FB third-quarter 2021 earnings of $3.22 per share beat the Zacks Consensus Estimate by 0.6% and increased 18.8% year over year.

Revenues of $29.01 billion missed the Zacks Consensus Estimate by 1.8% but increased 35.1% year over year. At constant currency (cc), the top line improved 34%.

Geographically, Asia-Pacific, the United States & Canada, Europe, and Rest of World (RoW) revenues grew 29.1%, 34.3%, 36.3%, and 49.1%, on a year-over-year basis, respectively.

Average Revenue per User (ARPU) in RoW, Europe, the United States & Canada, and Asia-Pacific grew 41.4%, 33%, 32.1% and 17.2%, on a year-over-year basis, respectively.

Advertising revenues surged 33.2% year over year to $28.28 billion and accounted for 97.5% of third-quarter revenues. Other revenues surged 194.8% year over year to $734 million.

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The tech giant's RoW, Europe, the United States & Canada, and Asia-Pacific advertising revenues grew 49.6%, 35%, 31.1% and 28.5%, on a year-over-year basis, respectively.

Ad impressions served rose 9% and average price per ad increased 22% from the year-ago quarter.

User Base Continues to Expand

Monthly active users (MAUs) were 2.910 billion, up 6.2% year over year.

MAUs in Asia-Pacific, RoW, Europe, and the United States & Canada grew 9.6%, 4.7%, 2.4% and 2.4% to 1.28 billion, 949 million, 423 million and 261 million, respectively.

Daily Active Users (DAUs) were 1.930 billion, which increased 6% year over year and represented 66% of MAUs.

Asia-Pacific DAUs were up 10.7% year over year to 805 million. DAUs in RoW and Europe grew 4.9% and 1% to 622 million and 308 million, respectively. The United States & Canada DAUs were unchanged at 196 million.

Family Daily Active People or DAP, defined as a registered and logged-in user who visited at least one of the Family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day, were 2.81 billion, up 10.6% year over year.

Family Monthly Active People or MAP increased 11.5% year over year to 3.58 billion.

Quarter Details

In the third quarter, total costs and expenses increased 38.4% year over year to $18.59 billion. As percentage of revenues, total costs and expenses were 64.1%, up 150 basis points (bps) on a year-over-year basis.

As percentage of revenues, marketing & sales (M&S), and research & development (R&D) decreased 20 bps and 40 bps, on a year-over-year basis, respectively.

General & administrative (G&A) expenses increased 180 bps from the year-ago quarter.

Facebook's employee base was 68,177 at the end of the third quarter, up 20% year over year.

Operating income of $10.42 billion increased 29.6% year over year. Operating margin contracted 150 bps year over year to 35.9%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash & cash equivalents and marketable securities were $58.08 billion compared with $64.08 billion as of Jun 30, 2021.

Capital expenditures were $4.54 billion in the third quarter compared with $4.74 billion in the previous quarter. Free cash flow was $9.55 billion compared with $8.51 billion reported in the previous quarter.

Facebook repurchased $14.37 billion of its Class A common stock in the reported quarter and had $7.97 billion remaining as per its share repurchase authorization, as of Sep 30, 2021. The company also announced a $50-billion increase in share repurchase authorization.

New Financial Reporting Segment

Beginning fourth quarter of 2021, Facebook will report under two segments: Family of Apps, which includes Facebook, Instagram, Messenger, WhatsApp and other services, and Facebook Reality Labs, which includes augmented and virtual reality related consumer hardware, software and content.

Guidance

Facebook expects total revenues between $31.5 billion and $34 billion for the fourth quarter of 2021. The guidance reflects continuing headwinds from the changes made by Apple AAPL in its iOS 14 update that has made ad-targeting difficult, besides macroeconomic and COVID-related concerns.

Non-ad revenues are expected to decline significantly in the fourth quarter of 2021. Last year's fourth quarter benefited from the launch of Quest 2.

Facebook anticipates total expenses for the current year to be between $70 billion and $71 billion, down from the previous range of $70-$73 billion. The company remains on track to spend more than $5 billion on safety and security in 2021.

Facebook expects its investment in Facebook Reality Labs to reduce overall operating profit in 2021 by roughly $10 billion.

For 2022, Facebook expects total expenses between $91 billion and 97 billion, driven by investments in technical and product talent, and infrastructure-related costs.

In the ongoing year, Facebook expects capital expenditures to be roughly $19 billion. For 2022, the figure is expected between $29 billion and $34 billion, driven by investments in data centers, servers, network infrastructure, and office facilities.

Zacks Rank & Stocks to Consider

Currently, Facebook has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Advanced Micro Devices AMD and Microsoft MSFT. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Both AMD and Microsoft are set to report their earnings results on Oct 26.

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