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Facebook warns of uncertain outlook amid pandemic as first quarter revenues beat forecasts but earnings fall short

One silver lining for the social media giant was that lockdown measures imposed during the outbreak had helped to drive a 10% surge in monthly users

Facebook Inc - Facebook warns of uncertain outlook amid pandemic as first quarter revenues beat forecasts but earnings fall short

Facebook Inc (NASDAQ:FB) has warned that its outlook for the coming year is “really uncertain” as advertisers pulled back from the social network during the coronavirus pandemic.

In its results for the first quarter, released late on Wednesday, the group also refrained from providing guidance for the coming year due to the volatile economy and also unveiled plans to cut expenditure by around US$3bn.

READ: Facebook and Google to be forced to share ad revenues with news companies under new Australian rules

 The uncertain outlook was a dark mark on what was otherwise a reasonable set of figures for the quarter, with Facebook reporting a 17% rise in revenue to US$17.7bn while earnings rose to US$4.9bn from US$2.4bn a year ago.

The earnings figure equated to around US$1.71 per share, slightly lower than the US$1.74 predicted by analysts.

The company also saw its monthly average users surge 10% year-on-year to 2.6bn.

While it did not provide an outlook for the rest of the year, Facebook said it had seen “signs of stability” in the first three weeks of April, although advertising revenue had been mostly flat in the period compared to 17% growth a year ago.

“The April trends reflect weakness across all of our user geographies as most of our major countries have had some sort of shelter-in-place guidelines in effect”, the company said.

The positive revenue and user growth appeared to have outweighed the earnings miss and cautious forecast for investors, with Facebook’s shares jumping 9.3% to US$212 in pre-market trading on Thursday.

Analyst highlights small and medium business risks

Commenting on the results, Hargreaves Lansdown analyst Sophie Lund-Yates said a key weakness for Facebook’s ad revenues was that it has “quite a lot of exposure to small and medium sized businesses, which are even more likely to unplug their marketing spending at the moment”.

“The flip side to the current disruption is increased screen time as millions of us are stuck and bored at home. The read across for Facebook and its stable of social media platforms is increased engagement with the likes of the flagship Facebook site, as well as Messenger, Instagram and WhatsApp”, she added.

“An uplift in usage won’t move the dial on revenues at the moment, but it’s still crucial that a growing user base likes, and uses, these apps. Without that pillar, plans to monetise the newer networks would fall over. We continue to think Facebook has substantial untapped growth opportunities, including growing services like WhatsApp Pay”, the analyst concluded.

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