Coverage: Facebook stock hits record high after earnings

Facebook Inc.’s mobile advertising business grew by more than 50 percent in the second quarter, the company said in its earnings report on Wednesday, and its stock soared to a record high.

David Ingram and Rishika Sadam of Reuters had the news:

Shares in Facebook, owner of four of the most popular mobile services in the world, rose more than 4 percent to about $173 in after-hours trading. Through Wednesday’s close, the stock price had climbed nearly 44 percent this year.

Facebook, which now has more than 2 billion regular users, has been squeezing more ads into its Facebook News Feed while adding more ads to its photo-sharing app Instagram, which has more than 700 million users.

With money cascading from those two services, Chief Executive Mark Zuckerberg said the company was turning attention to monetizing its two messaging services, Messenger and WhatsApp, which have more than 1 billion users each.

“I want to see us move a little faster here but I’m confident that we’re going to get this right over the long term,” Zuckerberg said in a conference call with analysts.

John Shinal of CNBC.com reported that the company lowered its earnings guidance:

The company also said on a conference call to discuss the results that 2017 expenses would rise less than previously forecast — it’s now saying that expenses will go up 40 to 45 percent, instead of 40 to 50 percent.

The stock jumped as much as 4 percent to a record high after Facebook announced that news.

Here are the key second-quarter metrics:

• EPS: $1.32 vs. $1.13 expected, according to Thomson Reuters
• Revenue: $9.32 billion vs. $9.2 billion expected, according to Thomson Reuters
• Mobile ad revenue: $8 billion vs. $7.68 billion expected, according to StreetAccount
• Monthly users (MAUs): 2.01 billion vs. 1.98 billion expected, according to StreetAccount
• Capital expenditures: $1.44 billion vs. $1.73 billion expected, according to StreetAccount

Facebook has been adding more video and display ads to the mobile version of its app as more consumers access the internet via their smartphones. The company is expected to add short TV-like programming soon.

“We are making some early investments to create episodic content,” Facebook Chief Operating Officer Sheryl Sandberg told CNBC in an interview.

The company has also overhauled its Instagram service over the past year to beat back a challenge from smaller rival Snap.

Tom Huddleston Jr. of Fortune focused on Facebook’s mobile video ad growth:

Earlier this year, Facebook said it expected its ad growth rate to “come down meaningfully” this year because it is running out of new places to put ads in its News Feed. That warning spooked some investors at the time, although the company has been testing new kinds of ads in recent months, including experimenting with pre-roll and mid-roll video ads (which run either before or during a mobile ad on the service). Facebook has also placed more ads in Instagram’s Stories—collections of video and pictures—while testing ads in its Craigslist-like Marketplace platform and in its popular Messenger messaging app.

In short, Facebook has been busy rolling out more ways for businesses to reach Facebook’s more than 2 billion users outside of the News Feed. So far, so good, as the much-feared ad growth decline hasn’t happened yet. However, during a call with analysts on Wednesday, Facebook CFO David Wehner threw some cold water on the usual optimism by noting that the company still expects its ad revenue growth rate to eventually slow during the second half of 2017. Part of the reasoning, the company said, is that Facebook’s ongoing plan to make money from Messenger, which has more than 1.2 billion global monthly users, has so far failed to make inroads quickly enough to offset slowing ad revenue growth elsewhere on the service.

On the earnings call, Facebook COO Sheryl Sandberg was adamant that the company should stay the course with its slow rollout of additional ads on Messenger so as to not overload users too quickly. ” We’re going to be slow and deliberate,” Sandberg said. Later this month, Messenger users will start seeing ads from businesses on the home tab of the service’s mobile app, while businesses are already able to communicate with users who click on their ads through the app.