Investors Double-Like Facebooks Earnings

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What's going on?

Facebook absolutely nailed it!! On Wednesday, it reported its 4th quarter earnings and its stock jumped more than 10% immediately following the results!

What does this mean?

In a world of uncertainty, Facebook was very clear: its still growing revenues substantially and its extremely profitable. Facebooks market leading position in mobile advertising is driving a lot of that growth and profitability: mobile now accounts for 80% of Facebooks total ad revenue. Daily user growth was up 17% year-on-year (that merelymatched expectations) – 1.04 billion people use Facebook every day. And all thats just Facebooks existing core business.

Why should I care?

The bigger picture: Facebook is betting on Virtual Reality (VR) and Artificial Intelligence (AI). In 2015, it tripled its investment in such areas, e.g. Oculus Rift. Right now those big bets are only costing money, not contributing to profits. But thats the sort of self-investment that could significantly drive future profits.

For the stock: Investors loved the results. Anytime a company comfortably beats both revenue and profit expectations, investors are going to be pretty happy. The fact it did so in a space that is, to some degree, struggling (cough Twitter … cough cough), is a sign that both its positioning (i.e. its scale) and its execution is second-to-none. Facebook (probably) wont be able to grow its advertising revenue at this rate forever but for now Facebook investors are cheering. And thats before anyone really ascribes any value to its future bets on VR and AI.

Originally posted as part of the Finimize daily email.

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