Facebook reported strong user growth in the first quarter of 2015, while revenue was lower than expected.
Revenue for the quarter was 42% higher than the year-ago quarter, up to $3.54 billion. This was shy of what analysts had forecast, of at least $3.56 billion.
The company’s revenue was hit by a strong dollar. Facebook said that revenue would have increased by 49% if it excluded the effect of exchange rates.
Advertising sales 46 percent higher year-on-year
The social media giant has been working hard to improve the quality and reach of advertisements, which account for about 94 percent of the company’s annual revenue. It has developed tools that determine more relevant ads for users, and those efforts have paid off.
Revenue from advertising increased by 46 percent to $3.32 billion compared to Q1 2014. Excluding currencies fluctuations, ad sales would have increased by 55 percent.
Mobile advertising revenue represented around 73% of advertising revenue for the first quarter of 2015, up from around 59% of advertising revenue last year.
According to a Bloomberg report, Brian Wieser, an analyst with Pivotal Research Group, said:
“Fifty-five percent underlying growth is remarkable. I don’t think investors accounted for the gravity of the currency effects.”
Costs and expenses for the first quarter of 2015 were $2.61 billion, an increase of 83%. Free cash flow for the quarter was $1.20 billion.
Earnings excluding some items were 42 cents a share, versus 35 cents last year. Estimates compiled by Bloomberg showed that analysts had expected 40 cents.
Strong start to the year for Facebook
“This was a strong start to the year,” said Mark Zuckerberg, Facebook founder and CEO. “We continue to focus on serving our community and connecting the world.”
It is evident that the company performed well in the first quarter of the year, yet Facebook shares dropped by 2.1 percent in extended trading.
As Wieser pointed out, investors may not have completely accounted for the impact of exchange rates.
Impressive user growth
Daily active users (DAU) were 936 million on average for March 2015, an increase of 17% year-over-year, while Mobile DAUs were 798 million on average for March 2015, an increase of 31% year-over-year.
Monthly active users were 1.44 billion as of March 31, 2015, an increase of 13% year-over-year, the company said. Mobile MAUs were 1.25 billion as of March 31, 2015, an increase of 24% year-over-year.