Facebook’s torrid revenue growth was tempered by Apple’s new ad-tracking opt-in requirement in iOS 14.5 — but the social giant still raked in a ton of money and posted profits that topped Wall Street expectations.
For the third quarter of 2021, Facebook reported $29.01 billion in revenue, up 35% year-over-year. Net profit rose 17%, to $9.2 billion (or $3.22 per diluted share). On average, Wall Street analysts expected Facebook to post $29.58 billion in revenue and EPS of $3.19, according to financial-data provider Refinitiv.
The company’s flagship Facebook service had virtually no user growth during the quarter: Monthly active users worldwide for Facebook hit 2.91 billion, up 7% year over year but flat sequentially (vs. 2.90 billion in Q2). For the full family of apps (Facebook, Instagram, Messenger, WhatsApp) MAUs were 3.58 billion, an annual increase of 12% and up 70 million quarter over quarter.
“We made good progress this quarter and our community continues to grow,” Facebook CEO Mark Zuckerberg said in announcing the results. “I’m excited about our road map, especially around creators, commerce and helping to build the metaverse.”
For Q4, Facebook said it expects total revenue to be $31.5 billion to $34 billion, implying year-over-year growth of 12%-21%. “Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors,” CFO Dave Wehner said in prepared remarks.
Evidently the Q3 results and the guidance weren’t as bad as investors feared: Facebook shares were up 3.6% in after-hours trading Monday.
Facebook had already warned investors in announcing Q2 earnings that it anticipated top-line growth to decelerate in the second half of 2021, due to increased headwinds with respect to ad targeting in 2021 from regulatory and platform changes, most notably Apple’s update with iOS 14.5 to require users to opt-in to allow ad tracking. Snap last week fell short of its Q3 revenue target, saying it underestimated the effect of the iOS 14.5 change on ad sales and also citing “global supply chain issues and labor shortages impacting our partners.”
Starting with the fourth quarter, Facebook said, it will adopt a new financial reporting segment structure with two reportable segments: Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp and other services; and Facebook Reality Labs (FRL), which includes augmented and virtual reality related consumer hardware, software and content.
The Facebook Q3 earnings come amid intensified scrutiny from media, lawmakers and regulators about the powerful company’s alleged harms. Facebook has seen a wave of bad PR in recent weeks following accusations by whistleblowers who have leaked internal documents to media outlets that portray the company as prioritizing profits over safety (allegations that Zuckerberg has denied). According to multiple reports based on the documents, senior Facebook execs have repeatedly ignored or downplayed employee concerns about misinformation and other harmful content.
The latest cache of materials, dubbed “The Facebook Papers,” was obtained by a consortium of 17 U.S. news organizations through a lawyer for ex-employee Frances Haugen, who had filed them with the SEC and provided redacted versions to Congress.
Meanwhile, Facebook is reportedly planning to change its corporate name, with Zuckerberg supposedly set to discuss the new name at the Facebook Connect developer conference on Thursday (Oct. 28). As first reported by The Verge, the new name will reflect Zuckerberg’s repositioning of the company as delivering “metaverse” virtual experiences that he has said will be the “ultimate expression” of social technology.