Facebook beats second quarter profit expectations, shares up 17%

25 Jul 2013

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Facebook Inc is drawing back many investors that had deserted it last year, thanks to a big earnings surprise.

The social network yesterday easily beat second-quarter profit and sale expectations, pushing its  shares up 17 per cent in late trading. The company swung to a profit with sales increasing 53 per cent to $1.81 billion from a year ago, lifted by a surge in mobile and local ad sales. The company reported a profit of $333 million, or 13 cents a share.

The company's stock rose high following the world's biggest social network posting higher revenue from mobile ads as also delivering a healthy second-quarter profit that reversed a loss in the same period a year ago.

The results follow weaker-than-expected results from online search leader Google Inc, signalling that Facebook's aggressive push into the mobile advertising market continued to pay off.

The company started showing mobile advertisements for the first time last spring, and yesterday it said mobile ads accounted for a whopping 41 per cent of its total advertising revenue.

The Menlo Park, California-based company's stock surged $4.48, or 17 per cent, to $30.99 in extended trading, with shares closing the regular trading session at $26.51. Facebook's stock was priced at $38 with the company going public in May 2012, but had failed to hit that level since.

Meanwhile, according to analysts, Facebook was getting traction in emerging what founder and CEO Mark Zuckerberg had called, a "mobile best" company. Since listing last May, Facebook's stock had been floundering even as concerns persisted that the company would not be able to make up for the lost desktop ad sales business and thrive in a mobile world.

Facebook shares vaulted nearly 20 per cent in after-hours trading, as the social network surprised investors grossing huge gains in revenue, earnings and active users for the second quarter yesterday.

Facebook's mobile-ad business was up 75 per cent from the prior three months, to $656 million in sales, and comprised 41 per cent of its advertising sales, as against the first quarter, when it was 30 per cent.

Facebook's chief financial officer, David Ebersman, said in an interview yesterday that investments the company had been making over the past year or longer were starting to pay off.

According to analysts, a good proportion of Facebook's growth in the quarter came from its local efforts, with the company surpassing its 1 million active advertisers, boosted by gains in local business advertising.

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