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Facebook Tops Q3 Earnings Forecast, Falls Light on Revenues As Apple Privacy Changes Bite

Facebook missed Street revenue forecasts, and said sales growth would slow over the final months of the year, as Apple's privacy changes hit social media ad sales.

Facebook Inc.  (FB) - Get Facebook, Inc. Class A Report posted stronger-than-expected third quarter earnings Monday, but fell modestly shy on revenues as Apple's privacy changes and COVID developments created "significant uncertainty" for the social media group's ad sales business.

Facebook said profits for the three months ending in September were pegged at $3.22, up 34.2% from the same period last year and 2 cents ahead of the Street consensus forecast of $3.19 per share.

Group revenues, Facebook said, rose 35.1% to $29.01 billion, just shy of analysts' estimates of a $29.57 billion tally. Advertising revenues, Facebook said, came in at $28.776 billion. Daily active users averaged 1.93 billion on average for September, up 6% from last year, while monthly active users rose 6% to 2.91 billion.

Looking into the final half of the year, Facebook said it sees revenues in the region of $31.5 billion to $34 billion, just shy of Street forecasts, as the impact of Apple's AAPL new privacy rules hits social media ad sales creating "significant uncertainty" for the group's main business.

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Facebook also said it would break out reporting of its Facebook Reality Labs (FRL) division starting in the final three months of the year, suggesting the "metaverse" business has gained traction and will dominate capital expenditures heading into 2022. For 2021, at least, FRL will clip $10 billion from Facebook's operating profit. 

"We made good progress this quarter and our community continues to grow," said founder and CEO Mark Zuckerberg. "I'm excited about our roadmap, especially around creators, commerce, and helping to build the metaverse."

Facebook shares were marked 2% higher in extended-hours trading immediately following the earnings release to indicate a Tuesday opening bell price of $335.10 each.

Late last week, Snap Inc.  (SNAP) - Get Snap, Inc. Class A Report, which makes the Snapchat messaging app, also said the new privacy changes in Apple's  (AAPL) - Get Apple Inc. (AAPL) Report operating system made it more difficult to track and target users with specific ads, "making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS."

Snap also slashed its near-terms sales forecasts, with chief business officer Jeremi Gorman also told investors that "advertising partners across a wide variety of industries and geographies that they are facing headwinds in their business related to disruptions in global supply chains as well as labor shortages and increasing costs', and were reducing marketing spend as a result.