plans to announce first quarter earnings after the market closes on Wednesday. Here is what you need to know:
PROFIT FORECAST: Facebook is expected to report quarterly earnings of $ 1.35 per share, up 30% from the previous year, according to data compiled by Thomson Reuters.
PROGNOSTIC REVENUES: Analysts predict that Facebook will report revenues of $ 11.41 billion, 42% more than the previous year due to the higher price of ads and the increased demand for its targeted advertising tools . According to data marketing firm Merkle, advertisers spent 48% more on Facebook ads in the first quarter compared to the previous year, matching the pace of growth in recent quarters.
WHAT THEY WATCH:
NEW REGULATION: Facebook has been in the sights of lawmakers since its recent revelations that 87 million users had incorrectly shared their data with Cambridge Analytica, a firm of political data that helped the Trump campaign in 2016. Chief Executive
He appeared before Congress earlier this month to respond to the controversy, which underscored Facebook's historically lax compliance with its data rules. Facebook redoubled its efforts to find developers who misused its platform, but most analysts and investors believe that additional regulation is inevitable. US regulators are likely to model new laws after strict privacy regulations in Europe, called the General Data Protection Regulation, which will take effect next month. "We believe that the final outcome of these hearings and political / political uproar is greater regulation," SunTrust analyst Youssef Squali said in a note on April 13.
ADVERTISING GROWTH: So far, the uproar has not dented the lucrative business of Facebook advertising business. Last month, several vendors, including Commerzbank, Germany's second-largest bank, said they would stop spending on Facebook ads, citing the Cambridge Analytica disclosures. Facebook immediately tried to calm their concerns, and the first data suggests that Facebook's efforts worked. "Our controls suggest that the advertiser's response to negative headlines is relatively modest, and perhaps limited to the largest brands" and possibly to small and medium-sized companies, according to Baird Equity Research. In addition, Facebook's biggest rival in online advertising space, Google's father
It revealed strong sales growth on Monday in its earnings.
#DELETEFACEBOOK ?: Even before the current controversy, Facebook users spent a little less time on the platform. In February, Facebook said its users spent 5% less time on the platform every day, in part because of the changes it introduced to discourage passive content consumption in the news. A slide in user commitment remains one of the imminent risks for the company. A survey by Cowen & Co. showed a decrease in the use of Facebook to 53 minutes per day in the first quarter of 2018, compared to 58 minutes the previous year. That decrease was especially pronounced among younger users between the ages of 18 and 24, according to the survey. The use of Facebook remained far above other social platforms.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com