What to expect from Facebook’s earnings report today

Tell us more, Mark.
Tell us more, Mark.
Image: AP Photo/Eric Risberg
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Facebook has outperformed Wall Street’s expectations in eight of the past nine quarters. Investors are hopeful for yet another strong earnings report when the company discloses its first-quarter results after US markets close today (April 27).

Overall, analysts are anticipating $5.26 billion in revenue, which would represent a 49% increase year over year, and earnings of 40 cents per share, up 120% from a year ago.

The momentum driving Facebook forward hasn’t shown any signs of letting up. The company now has 1.59 billion monthly active users on the social network—1.04 billion of whom check the app everyday—not to mention 1 billion users on WhatsApp, 900 million on Messenger, and 400 million on Instagram. Two years after acquiring Oculus, it shipped its first virtual-reality headset in March. And the stock’s trading near an all-time high to boot.

But compared with Facebook’s core business, the rest is incremental, and won’t meaningfully contribute to the bottom line for quite a while. Facebook is believed to be selling its VR hardware at a loss to speed up widespread adoption of this emerging technology. Monetization of WhatsApp and Messenger remains nascent. Instagram, the most mature of Facebook’s side businesses, is estimated to contribute $1.6 billion in revenue, or 5% of sales, this year, according to SunTrust Robinson Humphrey.

These projects still have huge potential in the long term. Revenue from Messenger and WhatsApp, for example, are forecast by Deutsche Bank to total $10 billion by 2020. And virtual reality is widely believed to be the next major computing platform.

With messaging and virtual reality being major themes of Facebook’s recent developer conference, investors will press the company for more clarity around their revenue potential, especially details around Oculus sales.

By now, investors have learned that it pays to be patient with Facebook. Recall that analysts were deeply skeptical of Facebook, back when it went public, for seemingly lacking a mobile strategy. Four years later, the company built a $13 billion mobile business from nothing, and mobile remains stronger than ever.