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Facebook's day of reckoning: 2Q earnings report

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POSTED July 25, 2012 9:05 p.m.


 

MENLO PARK (AP) — It's showtime for Facebook. Call it the second act after its rocky initial public offering two months ago. On Thursday, the company will take the spotlight once again for its first earnings report as a public company.

Facebook's fate hinges on its ability to convince businesses that the ads on its website and on its mobile application are effective. To do that, the world's largest online social network needs to keep its nearly 1 billion users logging on as often — and for as long — as possible, interacting with each other as well as with brands.

The release of its quarterly financial results will be Facebook's chance to prove to investors that it can continue growing revenue from the ads it serves on its popular social networking site.

It comes a day after Zynga Inc., which contributed to 12 percent of Facebook's revenue last year, reported disappointing earnings. Facebook's stock slid in after-market trading Wednesday, as did Zynga's.

Though there's a lot riding on Facebook's second-quarter earnings report, Wall Street analysts aren't expecting big surprises.

Why? Facebook effectively warned investors before its IPO that Wall Street's expectations were too high. In a filing issued a week before its IPO, Facebook said its mobile users are growing at a faster pace than the number of ads on its mobile platform.

As a result of that disclosure and others, many analysts reduced their estimates for Facebook's projected revenue and earnings.

On average, analysts are expecting Facebook to post earnings of 12 cents per share on revenue of $1.16 billion, according to a poll by FactSet. In all of 2011, it had net income of $1 billion and revenue of $3.71 billion, according to regulatory filings.

 

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