Facebook 3Q Beat Eclipsed by After-Hours Share Slide

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Facebook loescht falsche Profile (ARCHIV: Das Logo von Facebook ist in Berlin fuer eine Fotoillustration auf einem Laptopbildsch
Timur Emek, dapd/AP
By Matt Egan

Facebook (FB) said on Wednesday it swung to a stronger-than-expected profit in the third quarter as the social-networking giant parlayed soaring mobile ad sales to a 60% surge in total revenue.

Wall Street emphatically cheered Facebook's earnings beat, user growth and surprise margin expansion, driving already-hot shares of the Mark Zuckerberg company 15% higher in extended trading. But comments by a Facebook executive during an earnings call regarding a dip in teen usage and not increasing the frequency of newsfeed ads seemed to spook investors and shares dropped to about 1%, according to multiple reports.

Facebook said it earned $425 million last quarter, or 17 cents a share, last quarter, compared with a loss of $59 million, or 2 cents a share, a year earlier.

Excluding one-time items, it earned 25 cents a share, besting forecasts from analysts for 19 cents.

Revenue soared 60% to $2.02 billion, topping the Street's view of $1.91 billion. Ad sales surged 66% to $1.80 billion.

Mobile ad sales, which just a few quarters ago stood at zero, climbed to $882 million and now represent 49% of total ad revenue.

By comparison, mobile ad sales represented 40% of ad sales during the third quarter and just 30% in the first quarter.
Analysts had been banking on mobile ad sales of just $803.3 million.

Operating margins jumped to 37% from 30% the year before. Excluding share-based compensation and related tax expenses, non-GAAP margins expanded to 49%, compared with 42% a year ago and estimates from analysts for 41.4%.

Facebook reported 728 million daily active users for September, up 25% year-over-year. Monthly active users increased 18% to 1.19 billion as of last month.

Importantly, mobile active users jumped 45% to 874 million on a monthly basis and stood at 507 million on a daily basis. Monthly mobile active users had been expected to rise to 884.7 million.

"For nearly ten years, Facebook has been on a mission to connect the world," Zuckerberg said in a statement. "The strong results we achieved this quarter show that we're prepared for the next phase of our company, as we work to bring the next five billion people online and into the knowledge economy."

Facebook said its costs and expenses jumped 45% year-over-year to $1.28 billion due to infrastructure costs and increased headcount. The parent of Instagram listed cash and marketable securities of $9.33 billion as of the end of the third quarter.

Shares of Menlo Park, Calif.-based Facebook rallied 15.11% to $56.41 in extended trading on Wednesday.

Facebook has crushed the broader markets since reporting results on July 24, surging around 86%, compared with the Nasdaq Composite's advance of about 10%.

Earlier this week, reports revealed Facebook hosted BlackBerry (BBRY) executives to gauge the social-media giant's interest in a bid for the struggling smartphone maker.

The report comes a day after professional network LinkedIn (LNKD) posted a 56% leap in third-quarter revenue, but issued a fourth-quarter outlook that missed forecasts.

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