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Facebook Second-Quarter Earnings Live Blog

Real Money's Eric Jhonsa covers Facebook's second-quarter earnings report and call.

Facebook is heading into its second-quarter report trading near its all-time high, as investors bet the social media giant will join the likes of Alphabet, Snap and Twitter in reporting strong top-line numbers.

Among analysts polled by FactSet, the consensus is for Facebook to report second-quarter revenue of $27.85 billion (up 49% annually) and GAAP EPS of $3.04 (up 69%).

Facebook doesn't provide formal sales guidance, but does typically provide some commentary about how it expects revenue growth to trend in the coming quarters. Currently, the consensus is for Facebook's revenue to grow 31% annually in Q3 to $28.2 billion and 20% in Q4 to $33.73 billion.

Real Money's tech columnist Eric Jhonsa will be breaking down Facebook's second-quarter report, which is due after the bell on Wednesday, along with an earnings call scheduled for 5 p.m. Eastern.

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6:09 PM ET: Facebook's call has ended. Shares are down 3.8% after hours to $359.25 after Facebook topped Q2 estimates on the back of 56% Y/Y ad sales growth, while reiterating that it expects annual revenue growth to slow significantly in the second half of the year as it contends with tougher comps and greater ad-targeting headwinds.

Facebook/Messenger MAUs and DAUs each rose 7% Y/Y, while MAUs and DAUs for Facebook's entire app family rose 12%. The company maintained its full-year spending guidance, as well as its view that its ad revenue growth for the rest of the year will be primarily driven by ad price increases.

Thanks for joining us.

6:04 PM ET: Question is about Facebook's video vision and ability to grab ad dollars moving away from TV. And one about being able to maintain ad ROIs while having less user data.

Sandberg: We're seeing strong video ad growth. Video is still monetizing at lower rates than feed and stories ads, but it's improving. Advertisers are getting better at creating mobile-first video. The ability to pair video ads with other ad formats and services will be a differentiator.

Wehner: We're pleased with the progress we're making in offering advertisers tools that can help offset the loss of user data. AI is an important part of these efforts.

6:00 PM ET: A question about Facebook's messaging efforts, and one about its AI efforts.

Zuck: We're working on things like cross-app communications and business messaging APIs. Cross-app services will be important as we move towards the metaverse. Click-to-messaging ads are doing very well. Even if we aren't charging businesses for access to messaging APIs, we benefit from ad spend. And using the messaging APIs can yield a better user experience.

Regarding AI, Zuck says it's an area where Facebook's efforts have routinely surpasses expectations. Adds that he doesn't see AI progress slowing down anytime soon, and notes that industry adoption of Facebook's PyTorch machine learning framework has been a positive for the company.

5:55 PM ET: A question about iOS app-tracking opt-in rates for Facebook and Instagram. And one about Facebook's implied guidance for opex growth to accelerate in 2H21.

Wehner: iOS opt-in rates have been in-line with our expectations. Those changes aren't fully rolled out, but we expect they will be in Q3. Regarding opex, we expect growth rates for certain types of expenses, such as consumer marketing, to pick up during the back half of the year.

5:53 PM ET: A question about engagement for Reels ads.

Sandberg: We now have Reels ads in nearly all the markets that Reels have launched. We think they're a natural fit for a video format such as Reels. It's still early, but we think the ads have a lot of potential.

5:50 PM ET: A question about payments made to creators, and whether Facebook will pare back such spending as the number of creators on its platforms grows.

Wehner: Like YouTube, we already pay a lot out to "the creative industry." Not just via payments to individual creators, but also things such as music licensing. The goal is to create a vibrant community on our platforms.

5:48 PM ET: Question about Facebook's metaverse efforts, and one about the impact of iOS policy changes on direct response advertisers.

Zuck: I do think the metaverse is a wave that a lot of companies will be able to ride -- for example, a GPU developer such as Nvidia will benefit. Hardware development is still important for us, as we try to enable the user experiences we envision. 

Wehner: We continue seeing solid growth across both direct response and brand advertising. Direct response remains "the bulk" of our business. We have seen a nice rebound in brand ad spend, but DR continues to do well.

Sandberg: Increasingly, the brand/DR ad distinction is less and less traditional. Brand advertisers are becoming more proficient in what would traditionally be called DR advertising.

5:43 PM ET: Question about advertiser ROI, and whether some advertisers will feel priced out as Facebook ad prices keep rising.

Sandberg: Even as prices are rising, advertisers have tools to run ad campaigns that work for them. We're certainly seeing our large brand advertisers get better at reaching users, and we're also seeing smaller advertisers compete effectively for ad space.

5:41 PM ET: A question about ad impression growth, and one about the impact of Apple's IDFA/ATT policies.

Wehner: High year-ago impression growth is impacting our annual impression growth, as is the shift towards greater video viewing on Facebook's platforms. We still have major advertising opportunities for servics such as Instagram Explore/Reels and Facebook Marketplace.

Regarding ATT, he says that while Facebook is benefiting from a strong online ad environment, it has "been very challenging for advertisers to navigate," and that the company has been rolling out tools to help advertisers continue effectively targeting users and converting them at high rates.

5:37 PM ET: A question about user growth. Also one about Facebook's metaverse efforts, and one about its AR/VR hiring.

Wehner: DAUs are impacted in some markets by the end of COVID restrictions. In Europe, we're seeing user growth impacted by seasonal softness and the end of COVID restrictions.

Zuck: We want to build social products that scale. We're aiming for hundreds of millions of people to use our metaverse products. Commerce will be increasingly important here, via digital goods and creators. Our focus right now is on developing the community and growing the user base. But over the long-term, we expect there'll be a large digital economy around this.

Wehner: When it comes to capital allocation, our overall focus is on growth. We're investing billions of dollars annually on AR/VR, and we expect it to remain a major spending area.

5:32 PM ET: First question is about Facebook's shopping efforts. And one is about its efforts to win over creators.

Zuck: For commerce, the main thing to keep in mind is the ad business is so large it will take a while for commerce to be a major revenue contributor. We're looking to work our way down the funnel from product discovery to purchases. There are already a meaningful number of businesses using Shops, and we expect that to keep compounding. Being able to conduct transactions natively within Facebook's apps yields a better user experiences.

Regarding creator efforts, Zuck admits there's a lot of competition, but argues that creators will want to be on multiple platforms, and that its monetization tools, ad products and distribution will be selling points. Also says attracting creators will also improve the quality of the content on Facebook's platforms over the long run.

5:26 PM ET: The Q&A session is starting.

5:26 PM ET: Wehner goes over Facebook's guidance (shared in the Q2 report). 

5:23 PM ET: Wehner: Q2 ad impression growth was primarily driven by emerging markets, especially in Asia-Pac. "Other" revenue growth was impacted by headset demand seasonality and a one-time charge related to Quest.

5:22 PM ET: Wehner notes forex provided a $982M revenue boost. Also says the macro environment for online ads remains very strong.

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5:20 PM ET: CFO Dave Wehner is now talking.

5:19 PM ET: Sandberg: As we've launched new consumer products over the years, we've found ways to monetize them via ads.

Says that Facebook focused on business product innovations in 4 areas: Discovery, commerce, privacy-enhancing ad technologies and building tools to help businesses beyond marketing. For example, to help them with customer service or hiring.

5:15 PM ET: COO Sheryl Sandberg is talking. She says Facebook's strongest verticals remain the ones that did well during the pandemic, such as e-commerce and CPG, while adding COVID-impacted verticals are rebounding.

5:14 PM ET: Zuck: We continue working on products that give users a pervasive sense of reality. The Quest 2 headset continues doing well. We continue working on launching mixed-reality glasses with Ray-Ban. 

He also talks a bit about Facebook's vision for the metaverse. As discussed in a recent interview with The Verge, Zuck says Facebook's metaverse vision extends beyond AR/VR and encompasses PCs, mobile devices, etc. Calls it one of the most exciting projects Facebook has worked on, and reiterates that he thinks the metaverse needs an open ecosystem. Declares that in the coming years, people will transition from primarily seeing Facebook as a social media company to seeing it as a metaverse company.

5:09 PM ET: Zuck moves onto Facebook's shopping/e-commerce efforts. Notes services such as Shop and Marketplace, and says Facebook is working to better integrate them. Says a lot of people are using WhatsApp payment tools in Brazil and India. 

5:07 PM ET: Zuck: On-demand video is growing fast. We're building a number of monetization tools for video creators. These include mid-stream video ads and integrated shopping tools.

He also notes Facebook's rollout of live audio tools, podcast tools, etc. And he reiterates that Facebook's creator monetization services will remain free for creators until 2023.

5:04 PM ET: Zuck: We want our platforms to be the best place for creators to earn a living. Video in particular is becoming the primary way that people use our products and express themselves. Video now accounts for almost half of all time spent on Facebook, and Reels is now the largest contributor to Instagram engagement growth.

5:02 PM ET: Mark Zuckerberg is talking.

5:01 PM ET: Facebook's call is starting. Typically, the call features prepared remarks from Mark Zuckerberg, COO Sheryl Sandberg and CFO Dave Wehner, after which the execs field questions from analysts.

4:55 PM ET: Facebook's earnings call will be starting in a few minutes. I'll be covering, but here's the webcast link for those wanting to tune in.

4:52 PM ET: Facebook's recent op. margin trajectory. After coming under pressure during the first 3 quarters of 2020 due to heavy spending growth and COVID-related revenue headwinds, op. margin has been above 40% each of the last 3 quarters, and was up 11 points Y/Y in Q2.

FB Q2 op margin

4:45 PM ET: Thanks in large part to the buybacks, Facebook's cash balance fell slightly Q/Q to $64.08B, in spite of the company generating $8.51B of free cash flow in Q2.

4:42 PM ET: Providing a boost to Q2 EPS: Facebook spent $7.08B on stock repurchases. That's up sharply from Q1's $3.94B and the year-ago period's $1.37B.

4:41 PM ET: Facebook continues investing aggressively: GAAP costs/expenses rose 31% Y/Y to $16.71B, up from Q1's 25% clip. Capex rose by $320M Q/Q to $4.74B, and headcount rose 5% Q/Q and 21% Y/Y to 63,404.

More than half of Facebook's GAAP opex involves R&D spend, which rose 37% Y/Y to $6.1B.

4:35 PM ET: Average revenue per person for Facebook's app family, which is depressed some by the fact that WhatsApp remains lightly monetized for now, rose 37% Y/Y to $8.36.

FB Q2 ARPP

4:33 PM ET: Facebook's global ARPU, which is based on its Facebook/Messenger active user count, rose 44% Y/Y to $7.05. U.S/Canada ARPU ($53.01) remains more than 3x that of the next-highest region (Europe).

FB Q2 ARPU

4:26 PM ET: Total monthly active people for Facebook's entire app family (including Instagram/WhatsApp) rose 12% Y/Y to 3.51B, while daily active people rose 12% to 2.76B. This compares with 15% growth rates in Q1 (a pandemic-driven Q2 2020 increase in app usage spelled tougher comps).

4:22 PM ET: Facebook is now down 3% after hours. They posted a solid Q2 beat, but high expectations and the Q3/Q4 commentary seem to be weighing on the stock.

4:20 PM ET: "Other" revenue, which is now dominated by Oculus headset sales, came in at $497M - up 36% Y/Y but missing a $686M consensus and down from Q1's $732M.

4:17 PM ET: Ad revenue rose 56% Y/Y to $28.58B, comfortably beating a $27.19B consensus.

Price per ad rose an impressive 47% Y/Y, while ads delivered rose 6%. For comparison, price per ad rose 30% in Q1, and ads delivered rose 12%. Facebook reiterates it expects ad growth to be "primarily" driven by higher prices for the rest of the year.

4:13 PM ET: Here's the Q2 report, for those interested.

4:12 PM ET: Full-year GAAP cost/expense guidance is unchanged at $70B-$73B, as is full-year capex guidance of $19B-$21B and expectations for a high-teens full-year tax rate.

4:11 PM ET: The company also reiterates that it expects "increased ad targeting headwinds in 2021 from regulatory and platform changes," while adding that the impact of recent iOS user-tracking policy changes is expected to have a bigger impact in Q3 than Q2.

4:09 PM ET: Facebook: "In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth. When viewing growth on a two-year basis to exclude the impacts from lapping the COVID-19 recovery, we expect year-over-two-year total revenue growth to decelerate modestly in the second half of 2021 compared to the second quarter growth rate."

4:08 PM ET: Facebook/Messenger MAUs rose 7% Y/Y to 2.9B, while DAUs rose 7% to 1.91B. That compares with consensus estimates of 2.91B and 1.91B.

4:06 PM ET: For now, shares are down 3.6% after hours.

4:06 PM ET: Results are out. Q2 revenue of $29.08B beats a $27.85B consensus. GAAP EPS of $3.61 beats a $3.04 consensus.

4:00 PM ET: The Q2 report should be out shortly.

3:58 PM ET: As usual, Facebook's commentary about expected revenue growth will be closely watched. In April, the company forecast annual Q2 revenue growth would be comparable to a Q1 clip of 48%, while adding that it expects growth rates to "significantly decelerate" in Q3 and Q4 amid tougher annual comparisons.

3:53 PM ET: Facebook's stock has shot higher since the company soundly beat Q1 estimates in April, and is up 37% YTD heading into its Q2 print. Strong Q2 beats from Alphabet, Snap and Twitter have heightened expectations that Facebook will also deliver very good numbers.

3:49 PM ET: The FactSet consensus is for Facebook to post Q2 revenue of $27.85B and GAAP EPS of $3.04. Facebook/Messenger MAUs are expected to come in at 2.91B (+8% Y/Y) and DAUs at 1.91B (+8%).

3:47 PM ET: Hi. I'm live-blogging Facebook's Q2 report and earnings call.