Facebook Q2 ad revenue up 56% at $28.6 billion

Second quarter operating income was $12.4 billion from $5.96 billion, representing a 43% operating margin. Net income was $10.4 billion compared to $5.1 billion

e4m by exchange4media Staff
Published: Jul 29, 2021 12:22 PM  | 4 min read

After Google, social media giant Facebook has delivered strong results in Q2. Facebook's total revenue in Q2 was $29.1 billion, up 56% from $18.6 billion in the same period last year. Q2 ad revenue was $28.6 billion, up 56% from $18.3 billion. Other revenue was $497 million, up 36%.

Total expenses were $16.7 billion, up 31% compared to last year. Cost of revenue increased 41%, driven primarily by consumer hardware costs, payments to partners, and core infrastructure investments. R&D increased 37%, driven primarily by hiring to support our core products and consumer hardware efforts. Marketing & Sales increased 15%, mainly driven by hiring and marketing spend.

Lastly, G&A expenses increased 23%, driven mostly by employee-related costs and legal expenses. The company added over 2,700 net new hires in Q2, primarily in technical functions. It ended the quarter with over 63,400 full-time employees, up 21% compared to last year.

Second quarter operating income was $12.4 billion from $5.96 billion, representing a 43% operating margin. Net income was $10.4 billion compared to $5.1 billion.

"We benefited from a currency tailwind and had foreign exchange rates remained constant with Q2 of last year, total revenue would have been $982 million lower. On a two-year basis, Q2 total revenue growth decelerated to 72% from 74% in the first quarter," Facebook CFO Dave Wehner told analysts during the Q2 earnings call.

He further stated that the macroeconomic environment for online advertising remains very strong. "The growth in advertising revenue was largely driven by verticals that have performed well during the pandemic, such as online commerce and consumer packaged goods. In addition, we saw improved growth trends in verticals that were particularly challenged during the pandemic, such as travel, entertainment and media."

On a user geography basis, ad revenue growth accelerated in all regions as we lapped the second quarter of last year, which was the period hit the hardest by the pandemic. Growth was strongest in Rest of World at 86%. Europe, Asia-Pacific, and the US & Canada grew 63%, 56%, and 48%, respectively. Europe, Asia-Pacific and Rest of World all benefited from currency tailwinds.

In Q2, the total number of ad impressions served across our services increased 6% and the average price per ad increased 47%. Impression growth was driven primarily by developing markets, especially in Asia-Pacific, while pricing growth benefited from broad-based strength in advertiser demand. Recall that in the second quarter of 2020, the effects of the pandemic contributed to elevated impressions and depressed prices, which we are now lapping.

Facebook daily active users (DAUs) reached 1.91 billion, up 7% or 123 million compared to last year. DAUs represented approximately 66% of the 2.90 billion monthly active users in June. Monthly Active Users (MAUs) grew by 194 million or 7% compared to last year.

"We estimate that approximately 2.8 billion people used at least one of our services on a daily basis in June, and that approximately 3.5 billion people used at least one on a monthly basis. Our global community continued to grow even as we lapped elevated user growth in the second quarter of last year related to the pandemic," Wehner said.

Similar to the second quarter, Facebook expects advertising revenue growth to be driven primarily by year-over-year advertising price increases during the rest of 2021. In the third and fourth quarters of 2021, the company expects 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 recovery, we expect year-over-two-year total revenue growth rates to decelerate modestly in the second half compared to the second quarter rate," Wehner noted.

Facebook also expects increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which is expected to have a more significant impact in the third quarter compared to the second quarter.

Total expenses in 2021 are expected to be in the range of $70-73 billion, unchanged from prior outlook. The year-over-year growth in expenses is driven primarily by investments in technical and product talent, infrastructure, and consumer hardware-related costs.

Capital expenditures for the fiscal will be in the range of $19-21 billion, unchanged from prior estimate. "Our capital expenditures are driven primarily by our investments in data centers, servers, network infrastructure, and office facilities. We expect our full-year 2021 tax rate to be in the high-teens," Wehner added.

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