Facebook shares rise as investors focus on earnings beat and buyback over revenue miss and outlook

Facebook shares rose more than 3% in extended trading on Monday after the company reported better-than-expected third-quarter earnings even as revenue missed analysts’ estimates.

Facebook also said it’s increasing its share buyback program by $50 billion.

Here are the results.

• Earnings: $3.22 vs $3.19 per share expected by analysts, according to Refinitiv.
• Revenue: $29.01 billion vs $29.57 billion expected by analysts, according to Refinitiv.
• Daily active users (DAUs): 1.93 billion vs. 1.93 billion expected by analysts, according to StreetAccount.
• Monthly active users (MAUs): 2.91 billion vs. 2.93 billion expected by analysts, according to StreetAccount.
• Average revenue per user (ARPU): $10.00 vs $10.15 expected by analysts, according to StreetAccount.

The company announced its plans to break out Facebook Reality Labs into its own reporting segment starting in the fourth quarter. That unit focuses on hardware, augmented reality and virtual reality products. The other revenue segment will come from its family of apps, which include Facebook, Instagram, Messenger, WhatsApp and other services.

Facebook expects its investment in the hardware and VR segment to reduce operating profit in 2021 by approximately $10 billion.

In July, Facebook announced the formation of a team that would work on the metaverse, digital worlds in which multiple people can interact within a 3D environment. Two months later, the company said it would elevate Andrew “Boz” Bosworth, who is currently the head of Facebook’s hardware division, to the role of chief technology officer in 2022.

Facebook’s revenue increased 35% from a year earlier, while net income rose 17% to $9.2 billion, from $7.8 billion a year prior.

The company said it expects fourth-quarter revenue of $31.5 billion to $34 billion. Analysts were projecting sales of $34.8 billion. Facebook said the forecast “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.”

Apple introduced privacy changes earlier this year, adding prompts that allow users to keep from being targeted with ads on apps. Snap shares plunged 27% on its earnings report last week after the company blamed the iOS changes for a disruption to its business.

Revenue from Facebook’s “other” segment, including consumer hardware such as Oculus virtual reality headsets, totaled $734 million, up 195% and more than the $477 million StreetAccount consensus estimate.

The company’s free cash flow of $9.55 billion fell short of the $9.9 billion StreetAccount consensus.

Facebook said in the third quarter it had 3.58 billion monthly users across its family of apps, up from 3.51 billion in the second quarter. This metric is used to measure Facebook’s total user base across its main app, Instagram, Messenger and WhatsApp.

In the U.S. and Canada, where Facebook generates more average revenue per user than in other regions, the company reported 196 million daily active users, up from 195 million in the second quarter. In Europe, the number rose to 308 million from 307 million in the second quarter.

While investors continue digging into the numbers, all the recent attention on Facebook stems from a series of reports, initially from The Wall Street Journal, regarding internal research released by former employee Frances Haugen.

Haugen initially shared some of the documents she acquired during her time at Facebook with the Journal, and she then appeared in front of a Senate panel earlier this month to testify about her experiences at the company. Since then, Haugen has released the documents to several more news outlets, leading to additional news articles.

The reports show that Facebook is aware of many of the harms its apps and services cause but either doesn’t rectify the issues or struggles to address them. More documents are expected to be shared daily over the coming weeks.

Since Haugen began leaking documents and testifying, another whistleblower has submitted an affidavit with allegations about Facebook’s behavior, and previous whistleblower Sophie Zhang has again spoken up against the company.

Facebook’s call with analysts on Monday afternoon will be the first time CEO Mark Zuckerberg speaks publicly since Haugen began releasing documents. Zuckerberg addressed some of the claims made by Haugen and the Journal in a Facebook post on Oct. 5.

WATCH: Facebook needs to be bullish on its own stock