Facebook, Inc. Earnings: 8 Metrics to Watch

By Markets Fool.com

After market close today, social network Facebook (NASDAQ: FB) will report its financial results for its third quarter. With the stock up 26% in the past 12 months, crushing the S&P 500's 1.3% gain during this same period, investors will be watching the digital advertising giant's results closely.

Continue Reading Below

Facebook user. Image source: Facebook.

When the social network reports its third-quarter update, here are some metrics to check in on.

1. Revenue: On average, analysts are expecting Facebook to report revenue of $6.92 billion, up about 54% from the company's $4.5 billion in annual revenue in the year-ago quarter. This year-over-year growth would notably mark a deceleration from Facebook's 59% year-over-year revenue growth in the prior quarter.

2. Non-GAAP EPS: The consensus analyst estimate for Facebook's EPS is $0.97, up from $0.57 in the year-ago quarter, and the same as the company's non-GAAP EPS in the prior quarter.

3. GAAP EPS: Facebook's GAAP EPS has importantly been on the rise recently, too. In Facebook's second quarter, GAAP EPS was $0.71, up 184% from $0.25 in the year-ago quarter. Given that there aren't any sudden changes expected to Facebook's GAAP expenses in the company's third quarter, investors will want to look for GAAP EPS similar to the $0.71 Facebook reported in Q2. If the figure is lower, look for an explanation from management in the company's earnings release or in the conference call following the release.

Continue Reading Below

4. Monthly active users: In Facebook's second quarter, monthly active users on the company's core Facebook platform were 1.71 billion, up 15% year over year. If Facebook can achieve the same year-over-year growth in the key metric in Q3, monthly active users will hit 1.78 billion.

5. Daily active users: Facebook's second-quarter daily active users were at 1.13 billion, up 17% year over year. Similar growth in Q3 would put daily active users at 1.18 billion.

6. Mobile daily active users: Facebook's mobile daily active users were up an impressive 22% in the social network's most recent quarter, hitting 1.03 billion. Achieving this same growth in Q3 would put Facebook's mobile daily active users at 1.09 billion.

Facebook Live. Image source: Facebook.

7. Engagement: Investors can check in on how engaged Facebook users are simply by dividing daily active users by monthly active users. Engagement on Facebook hit a record high of 66% in the company's most recent quarter. With the rise of features like Facebook Live and the increasing use of Groups, there's good reason to expect engagement to remain at this level in Q3.

8. Advertising revenue: Facebook's advertising revenue, which accounts for about 97% of Facebook's total revenue, jumped an impressive 63% in Facebook's second quarter. In Q3, investors shouldn't expect growth in this key metric to be as impressive. Management warned in Facebook's second-quarter conference call that tough comparisons in the year-ago quarter should cause a deceleration in the key metric going forward.

Facebook's third-quarter earnings release will be available at the company's investor-relations website after market close on Wednesday, Nov. 2. Facebook management also plans to host a live conference call, which will be available at the same webpage, to discuss the quarter's results at 2:00 p.m. PST.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Daniel Sparks owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.