Facebook is set to report its Q3 earnings Wednesday afternoon and Wall Street expects solid growth.
Analysts expect revenue of $US4.37 billion up 36.4% from $US3.2 billion in Q3 2014 and EPS of $US0.52, up from $US0.43 at the same time last year.
Analysts from MKM Partners say the key thing they will be looking for is news on how quickly Instagram’s ad business is ramping up.
Facebook finally opened up Instagram’s ad network to all advertisers, and gave marketers access to Facebook’s targeting tools, in September. The company doesn’t specifically break out the photo sharing app’s revenue yet, but analysts are sure to ask about it during the company’s during the earnings call.
Instagram currently has 400 million users, but the size of the potential business opportunity over the next few years depends on who you ask. Bank of America Merrill Lynch estimates that Instagram could become a $US300 million business by 2016, while SunTrust puts the number at a more modest “greater than $US2 billion” by 2017.
Other things to look for:
Questions about the monetisation of WhatsApp, increased spending, and updates on Facebook’s growth in international markets.
In September, Facebook announced that messaging app WhatsApp hit 900 million monthly active users. CEO Mark Zuckerberg has promised in the past that once any of Facebook’s properties reach the magical 1 billion MAU target, Facebook will start monetizing them. With only 100 million to go, WhatsApp will likely be front-of-mind for investors looking for Facebook’s next big revenue opportunity.
Facebook recently made announcements regarding its increased focus on machine learning and artificial intelligence and virtual reality through its Oculus Rift headset. Robert W. Baird analyst Colin Sebastian told The Wall Street Journal that he expects Facebook to accelerate its research and development spending, and that he’ll be looking for increased expense forecasts for next year.
Finally, Facebook recently made a big press push around its efforts in emerging markets, and how it’s optimising both its content and its advertising to work well in areas of the world with poor internet connectivity. Last quarter, Facebook reported that about ~26% of its revenue came from outside of North America and Europe. We’ll see if that percentage shifts at all.
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