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Facebook Third-Quarter Earnings Live Blog

Real Money's Eric Jhonsa covers Facebook's third-quarter earnings report and video interview with management.
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Facebook's stock is down 13% since the social media giant posted its second-quarter earnings report in July, pressured by worries about the fallout from recent whistleblower allegations and more recently disappointing numbers from Snap.

Bulls are hoping Facebook can put markets at ease when it reports after the bell on Monday. Among analysts polled by FactSet, the consensus is for Facebook to post third-quarter revenue of $29.49 billion (up 37% annually) and GAAP EPS of $3.19 (up 18%).

The CFO outlook commentary that Facebook provides in its reports will also be closely watched. In July, the commentary included a forecast that revenue growth is expected to "decelerate significantly on a sequential basis" in Q3 and Q4, as well as full-year total expense guidance of $70 billion to $73 billion.

Eric Jhonsa, Real Money's tech columnist, will be live-blogging Facebook's earnings report, along with a call scheduled for 5 P.M. Eastern Time. Please refresh your browsers for updates.

6:11 PM ET: Facebook's call has ended. Shares are up 1.8% to $334.75 after hours after the company gave investors quite a lot to digest in its Q3 report and call.

Q3 results were mixed -- revenue missed amid growing headwinds related to iOS user-tracking policy changes, while EPS beat with the help of $14.4B worth of stock buybacks. And Q4 sales guidance was below consensus, with Facebook, which has historically guided conservatively, citing the "significant uncertainty" it sees related to iOS 14 changes and macro and COVID issues.

Facebook also added $50B to its buyback authorization and issued 2022 cost/expense and capex guidance that respectively imply 30%+ and 50%+ growth at the midpoints of its guidance ranges. And notably, the company said it will break out the sales and operating income of it AR/VR operations from those of its core app family, while adding the former will depress its total 2021 op. income by roughly $10 billion this year. 

Thanks for joining us.

6:02 PM ET: Wehner notes Facebook's AI-related capex will include ad-related investments in AI tools that can offset the loss of targeting/measurement data caused by iOS policy changes.

6:00 PM ET: A question about Facebook's efforts to drive more commerce activity on its own apps, and one about its recruiting efforts.

Sandberg: We already have a lot of commerce activity on our platforms. Commerce is our largest ad vertical. COVID accelerated it, but it was already strong before. For commerce, we're focused on being the best place to advertise, making it easier to sell on the platform and improving the customer experience. We think we're very strong in the first area. We're making progress in the second and third, but still have room to improve.

Wehner: We're looking to build technical talent next year. We'll be increasing headcount outside of the Bay Area. Europe is an important part of that.

5:56 PM ET: Wehner says iOS changes and macro/supply chain issues are the biggest factors weighing on Facebook's Q4 guidance.

5:55 PM ET: A question about expected growth rates, and one about Facebook's efforts to retool targeting.

Wehner: Our Q4 guidance implies lower Q/Q growth than what we've seen in the past. It reflects a lot of the uncertainty that exists about things like iOS changes and macro issues.

Sandberg: We're working to improve targeting. Our targeting remains very good for advertisers in many ways. Our ROI remains high, even though it's taken a hit recently.

5:51 PM ET: Another question about iOS changes, and one about using AI to improve content safety.

Wehner: The iOS changes were the largest headwind in Q3. We would've seen Q/Q sales growth in Q3 if not for them.

Zuck: I think our safety efforts have made a big impact. We release a quarterly transparency report, and they show the impact of our AI tools. More than 90% of the illicit content that's flagged is done so automatically. A lot of these decisions require nuance. I know there's a lot of scrutiny of our efforts, but I'm very proud of our team for the work they've done.

5:46 PM ET: Another metaverse question. Zuck highlights the recent launch of the Facebook Horizon virtual world platform. Also reiterates that Facebook's metaverse vision isn't just about headsets, but covers phones, PCs, etc.

5:43 PM ET: Wehner notes the bulk of iOS policy headwinds were already in place by the end of Q3. But he adds that Facebook hasn't gone through a holiday season with these issues before, and that this is baked into its Q4 sales guidance.

5:40 PM ET: A question about Facebook's long-term metaverse ambitions, and one about 2022 growth.

Zuck: We don't expect our metaverse efforts to make money in the short-term. But we see a large long-term payoff. We're aiming to build a new creator economy. For the next 1-3 years, it's not about the business impact, but on building the necessary infrastructure. Later in this decade, we could see more of a business impact. 

Regarding 2022 growth, Wehner says Facebook expects impressions and ad prices to keep rising, while adding revenue growth will be slower in 2022 than 2021. Indicates it'll be lower than spending growth (that's more than accounted for by a pre-earnings consensus for ~19% 2022 revenue growth)

5:35 PM ET: A question about the investments needed to address iOS issues, and one on Facebook's spending plans (how much is related to core Facebook vs. FRL).

Sandberg: Some of the ad tech we need can be developed in-house, such as AI tools and better targeting tools. For other things, we'll need to partner.

Wehner: We're not breaking out spending guidance by segment right now. We plan to spend a lot on capex, R&D, etc. We also expect to see higher travel and office expenses due to reopenings.

5:31 PM ET: A question about Facebook's Reels plans, and one on Facebook's efforts to deal with iOS privacy policy changes.

Wehner: We're very pleased with Reels' growth. Monetization is early -- we're just starting to roll out Reels ads on Instagram, and haven't launched them on Facebook.

Sandberg: The iOS changes impact both targeting and measurement. For measurement, we believe we're making progress towards dealing the under-reporting of conversions. Targeting is more of a long-term challenge. We have to rebuild our targeting systems to keep delivering relevant ads while adhering to the new rules. This is a multi-year effort.

5:28 PM ET: The Q&A session is starting.

5:27 PM ET: Wehner is going over Facebook's guidance (shared in the Q4 report). Regarding Facebook's 2022 capex guidance of $29B-$34B, he notes large AI-related investments are a major contributor (Nvidia has to be pleased).

5:25 PM ET: Facebook has pared its AH gains a bit, but is still up 2% to $335.38.

5:24 PM ET: Ad impressions rose 9% Y/Y in Q3, while average price per ad rose 22%, with iOS headwinds and reopenings weighing some on the latter.

For comparison, impressions rose 6% and (with the help of easy comps) price per ad rose 47% in Q2.

5:22 PM ET: Wehner: Forex swings provided a $259M boost to Q3 revenue.

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

5:19 PM ET: Sandberg notes that more than 60% of Facebook's video ad revenue now comes from mobile-optimized video. She also mentions Facebook is rolling out new shopping-related ad products and tools ahead of the holiday season.

5:17 PM ET: Sandberg: We believe we're underreporting iOS app install ad conversions. We're making progress on addressing this.

She also suggests reopenings are having an impact on e-commerce-related ad sales. Says they're still growing, but not at the rate they previously were. Also mentions that Facebook has seen some impact from COVID surges in certain international markets.

5:15 PM ET: Sheryl Sandberg is now talking. She notes iOS-related headwinds began in Q2 and ramped in Q3, impacting ad prices and measurement.

5:14 PM ET: Zuck once more goes over Facebook's ongoing commerce investments and (by allowing Facebook to handle conversions in-app) how they can help address some of the iOS targeting/measurement issues it's now facing.

He also reiterates Facebook's plans to invest heavily to build out its "metaverse" vision, while suggesting that Facebook's effort to create its own AR/VR platforms aims to make it less dependent on Apple/Google over time.

5:09 PM ET: I expect Reels to be as an important product for us as Stories. We plan on making significant additional investments in video services for Facebook and Instagram.

He also says Facebook is making appealing to young adults a bigger priority, while declaring TikTok to be one of Facebook's most effective competitors ever. Says the effort will take years rather than months.

5:07 PM ET: Zuck also asserts that social media isn't the main driver of many of the social problems Facebook is blamed for, such as greater political polarization. And that his company's remains focused on creating tools to better connect people.

5:05 PM ET: Regarding whistleblower allegations, Zuck asserts leaked documents are being selectively used to paint a false picture of his company. Reiterates that Facebook has called for greater regulatory oversight and has invested billions in safety/security efforts.

5:03 PM ET: Zuckerberg is talking. Notes Facebook experienced iOS-related ad revenue headwinds in Q3. Insists company will be able to navigate these issues over time.

5:02 PM ET: Facebook's IR chief is going over the company's safe-harbor statement. Typically, Facebook's call features prepared remarks from Mark Zuckerberg, COO Sheryl Sandberg and CFO Dave Wehner, after which all 3 execs field questions from analysts.

5:00 PM ET: The call is starting.

4:56 PM ET: Facebook's call should kick off in a few minutes (I'll be covering). Here's the webcast link, for those looking to tune in.

4:53 PM ET: Facebook ended Q3 with 68,177 employees, up 8% Q/Q and 20% Y/Y. Judging by recent spending growth, a large portion of these new hires are R&D-related.

4:50 PM ET: Q3 free cash flow (FCF) was $9.55B, up from $5.95B a year earlier. That helped Facebook end the quarter with $58B in cash/marketable securities and no debt, in spite of its large buybacks.

4:48 PM ET: GAAP costs/expenses rose 38% to $18.59B, an acceleration from Q2's 31% growth rate. $6.32B as spent on R&D, $3.55B on sales/marketing and $2.95B on G&A.

4:46 PM ET: Ad revenue rose 33% Y/Y to $28.28B, missing a $28.96B consensus. "Other" revenue, which among other things covers Oculus and Portal hardware sales, rose 195% to $734M, beating a $473M consensus.

4:44 PM ET: Notably, Facebook's ARPU fell 1% Q/Q as it dealt with iOS-related ad targeting/measurement headwinds (historically, ARPU has rarely dropped Q/Q outside of Q1). But ARPU was still up 27% Y/Y.

ARPU rose Q/Q in Asia-Pac and "Rest of World," but fell in North America and Europe. Facebook's North American ARPU is still more than 5x its global ARPU.


4:38 PM ET: Facebook's Q3 DAUs by region. 17M of the 22M DAUs added during the quarter for core Facebook/Messenger came from the Asia-Pac region, as did 13M of the 15M MAUs added.


4:35 PM ET: Facebook is now up 4.4% AH. A low bar, large buybacks and greater transparency are more than offsetting any investor qualms about the Q4 sales outlook and 2022 spending guidance.

4:32 PM ET: For Facebook's broader app family, DAUs rose 11% to 2.81B and MAUs rose 12% to 3.58B. Both figures were up 2% Q/Q.

4:30 PM ET: Facebook DAUs and MAUs (they cover the core Facebook app and Messenger) respectively came in at 1.93B and 2.91B (both up 6% Y/Y). DAUs were in-line with consensus, while MAUs were slightly below a 2.92B consensus.

4:28 PM ET: Here's Facebook's Q3 report, for those interested. And here's Facebook's slide deck.

4:24 PM ET: Facebook is guiding for 2022 GAAP costs/expenses of $91B-$97B. The midpoints of its 2021 and 2022 spending guidance ranges imply 33% Y/Y spending growth.

4:22 PM ET: Helping Q3 EPS beat estimates in spite of a revenue miss: Facebook spent $14.37B on stock buybacks during the quarter. With just $8B left on its buyback authorization at the end of Q3, the company says it has added another $50B to the authorization.

4:20 PM ET: Regarding Facebook Reality Labs (FRL), Facebook says it expects the segment to be a ~$10B headwind to its 2021 operating profit, while adding FRL investments will continue growing in the coming years.

For context, the pre-earnings consensus was for Facebook to generate GAAP operating income of $48.6B. While that figure might drop post-earnings due to Facebook's Q4 guidance, it still suggests Facebook's core business will comfortably generate more than $50B in op. income this year.

4:15 PM ET: Facebook is now guiding for 2021 GAAP costs/expenses of $70B-$71B, which compares with prior guidance of $70B-$73B.

2021 capex guidance has been revised to ~$19B from $19B-$21B. At the same time, the company has set 2022 capex guidance of $29B-$34B.

4:13 PM ET: Markets generally like greater transparency. And with the AR/VR ops widely believed to be losing money right now, the new reporting structure will give a clearer picture of just how profitable Facebook's ad operations are. Echoes of Alphabet's decision to separate the performance of its "Other Bets" segment from Google proper.

4:12 PM ET: Also of note (and possibly giving the stock a boost): Going forward, Facebook will be separately breaking out the sales and operating profits of its core app family and its AR/VR operations. The latter will be known as Facebook Reality Labs.

4:09 PM ET: Nonetheless, shares have reversed course and are now up 2.8% AH. Expectations were relatively low, particularly in the wake of Snap's report.

4:08 PM ET: Facebook guides for Q4 revenue of $31.5B-$34B, below a $34.72B consensus. 

Facebook: "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. In addition, we expect non-ads revenue to be down year-over-year in the fourth quarter as we lap the strong launch of Quest 2 during last year's holiday shopping season."

4:06 PM ET: Shares are down 1% after hours.

4:06 PM ET: Results are out. Revenue of $29.01B misses a $29.49B consensus. GAAP EPS of $3.22 beats a $3.19 consensus.

3:57 PM ET: Facebook’s stock is heading into its Q3 report up 20% YTD. Shares were previously up more, but have sold off in recent weeks as markets digested recent whistleblower allegations, as well as a softer-than-expected Q3 report from Snap that was posted on Thursday.

3:55 PM ET: Facebook’s Q3 report should arrive shortly after the bell. The consensus is for revenue of $29.49B and GAAP EPS of $3.19.

3:53 PM ET: Hi, this is Eric Jhonsa. I’ll be covering Facebook’s earnings report and call.