Facebook drops after light revenue, but engagement keeps rising

Facebook, the world’s No. 1 social network, just reported its first quarter earnings.

Here are the key numbers:

  • $US3.54 billion in revenue, compared to the $US3.56 billion in revenue expected by analysts.
  • EPS excluding special items of $US0.42 versus the $US0.40 cents expected by analysts.
  • Mobile advertising revenue represented roughly 73% of advertising revenue.
  • There were 1.44 billion monthly active users versus analyst expectations of 1.43 billion. Mobile monthly users total 1.25 billion, up 24% year over year.
  • Ratio of daily active users/monthly active users, an important measure of engagement, reaches 65%, up from 64% in the fourth quarter of 2014.
  • Operating margin drops to 26% from 43% in the year-ago period, as Facebook carries through with an expected boost in spending.

Facebook’s stock slipped more than 2% in after-hours trading.

Facebook’s mobile ads have proven to be a huge success, boosting the company’s revenue and its share price. But investors are hungry for evidence that new moneymakers such as video ads or ads on its Instagram service can deliver the next leg of growth.

Facebook has indicated that 2015 will be a year of investment as it ramps up some of these efforts as well as new businesses such as the Oculus virtual reality headset business that it acquired for $US2 billion last year and its twin messaging services Messenger and WhatsApp. All that spending, and the impact on profit margins, is something that investors will be paying close attention to, especially if revenue growth starts to slow.

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