Facebook Smashes Revenue Expectations as Mobile Ad Sales Surge

Facebook Inc.’s quarterly revenue rose a lot more than 50 percent, handily beating Wall Street expectations as its wildly popular mobile app and a push into live video lured new advertisers and encouraged existing ones to improve spending.

The business’s shares rose 9.5 percent in after-hours trading on Wednesday to $118.39, setting it on the right track to open at a fresh on top of Thursday, at nearly triple its initial public offering four years back.

Facebook also announced it’ll create a fresh class of non-voting shares in a move targeted at letting CEO Mark Zuckerberg hand out his wealth without relinquishing control of the social media juggernaut he founded.

The business plans to produce a new class of non-voting shares, which will be given as a dividend to existing shareholders. That could allow Zuckerberg, who would like to hand out 99 percent of his wealth, to market non-voting stock to invest in philanthropy and keep carefully the voting stock that assures his control.

Alphabet Inc. passed an identical proposal in 2014 that ensured its founders’ control by creating new non-voting shares.

Some 1.65 billion people used Facebook monthly by March 31, up from 1.44 billion a year earlier. Zuckerberg said users were spending a lot more than 50 minutes each day on Facebook, Instagram and Messenger, plenty of time given the an incredible number of apps open to users.

Advertisers are shifting money from television to web and mobile platforms, and Facebook is among the biggest beneficiaries. It faces fierce competition in the mobile video market, where rivals Snapchat and YouTube also garner vast amounts of video views each day.

Facebook recently expanded its live video product, rolling out several new features and rendering it more prominent on the app to encourage users to create videos and share them. The quarterly results showed success attracting advertisers with the move, and the business could expand its operating profit percentage to 55 percent from 52 percent a year earlier.

"The business consistently ‘warns’ about higher spending, however they consistently manage their spending to provide earnings upside. They’re an extraordinary company, plus they leave hardly any room for criticism," said Wedbush Securities analyst Michael Pachter, who called the operating margin an excellent surprise.

Facebook didn’t offer information on sales of its Oculus Rift virtual reality headset, but emphasized that it had been start and said that sales wouldn’t normally significantly impact 2016 revenue.

The results come after disappointments for investors from several major Silicon Valley firms.

"After Intel and IBM the other day, and Twitter and Apple yesterday, that is by far the very best number I’ve observed in technology," said Daniel Morgan, senior portfolio manager at Synovus Trust Company which owns about $40 million worth of Facebook shares, commenting specifically about Facebook ad revenue.

Facebook hasn’t begun advertising on a few of its most popular apps. "They haven’t yet fired up the monetization spigot for Messenger or WhatsApp, so there must be significant headroom still," said Jan Dawson, chief analyst at Jackdaw Research.

The business’s net income due to common shareholders nearly tripled to $1.51 billion, or 52 cents per share, in the first quarter from $509 million, or 18 cents per share, a year earlier.

Excluding items, the business earned 77 cents per share, beating Wall Street’s 62-cent consensus.

Total revenue rose to $5.38 billion from $3.54 billion, with ad revenue increasing 56.8 percent to $5.20 billion. Mobile ad revenue accounted for approximately 82 percent of total ad revenue, weighed against about 73 percent a year earlier.

Analysts typically had expected revenue of $5.26 billion.

If the stock proposal is approved — and Zuckerberg includes a most voting stock — the business will effectively perform a three-for-one stock split, issuing two shares of non-voting Class C capital stock as a one-time stock dividend for every share of Class A and Class B common stock.

Zuckerberg and his wife, Priscilla Chan, announced this past year that they would hand out 99 percent of their Facebook shares to invest in charitable endeavors.

Investors said these were not concerned that Zuckerberg could have increasing control, pointing to the business’s consistent capability to grow and exceed expectations.

"I honestly don’t believe anyone cares if he has more power, since he’s done everything right given that they went public," said Pachter.

(By Yasmeen Abutaleb and Anya George Tharakan; Additional editing by Noel Randewich; Editing by Sriraj Kalluvila, Peter Henderson and Bernard Orr)

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