Facebook earnings beat analyst expectations Wednesday, but the company warned growth later this year could “significantly” decline as new Apple privacy policies will make it more difficult for the social media giant to target ads to its users.
The positive earnings report for Facebook was bolstered by pandemic-driven traffic and ad sales and comes despite a number of roadblocks for the company in previous months. Those include the Apple operating system update that threatens its advertising revenue, a slew of antitrust hearings in the US Congress, and reports of a 2019 data leak that had affected millions of users.
In a call with investors Wednesday afternoon, Facebook’s chief operating officer Sheryl Sandberg said the company is working “to mitigate the impact of the iOS 14.5 update”.
“There are challenges coming to personalized advertising and we are doing a huge amount of work to prepare,” she said.
Total revenue for the social media giant, which primarily consists of ad sales, rose to $26.17bn in the first quarter, beating analysts’ average estimate of $23.67bn, according to IBES data from Refinitiv.
The world’s largest social media company said in its outlook that it expected second-quarter revenue growth to be stable or grow moderately, but warned that the third and fourth quarter growth rates could “significantly” decline when compared with past periods of increasingly strong growth.
Facebook has repeatedly blasted Apple over its new requirement for iPhone app developers to ask users’ permission to collect certain data for ads, saying the change would harm its business and hurt small companies that rely on personalized advertising.
Facebook’s monthly active users rose 10% to 2.85 billion, matching analyst expectations. Facebook’s user base is on pace to reach almost 3 billion people by the end of the year, according to the report.
Net income for the fourth quarter came in at $9.5bn, or $3.30 per share, compared with $4.9bn, or $1.71 per share, a year earlier. Analysts had expected a profit of $2.37 per share.
The company said its total expenses for the year would be in the range of $70m to $73m, as it invests in consumer hardware products and infrastructure.
CEO Mark Zuckerberg said on the investor call that following the strong quarter, Facebook will begin to invest more heavily in new areas including virtual reality and augmented reality.
“I have thought for a long time about augmented and virtual reality because I think it’s the holy grail of delivering a sense of presence in social experiences,” he said. “In the future, you’re going to be able to feel like you are really present with someone else.”
Reuters contributed to this report.
