Facebook, Apple Surge After Beating Estimates

Shares of Facebook (NASDAQ: FB) hit 52-week highs following the company’s first-quarter earnings reported Wednesday.

The social media giant reported revenue of $26.17 billion for the March-ended quarter, beating analysts’ average estimate of $23.67 billion. The total revenue, which primarily consists of ad sales, jumped 48% year-over-year (y/y). Diluted EPS came in at $3.30, well ahead of the Street’s expected earnings of $2.37 per share.

Despite the strong results, Facebook warned that 3rd and 4th quarter growth rates could “significantly decelerate” following Apple’s (NASDAQ: AAPL) iOS 14.5 privacy update. The update involves asking users if they consent to being tracked across other companies’ apps and websites for advertising purposes. Cupertino’s platform privacy changes mean less tracking. Less tracking brings obviously less access to data, which is an implication that could affect Facebook’s U.S. digital advertising business, estimated by eMarketer to be about $40 billion.

In fact, according to Patrick Moorhead, founder and president of Moor Insights & Strategy, once users update to iOS 14.5 on their iPhones, Facebook could see its U.S. ad revenue decline by as much as $3 billion annually.

In a call with investors Wednesday afternoon, FB’s Sheryl Sandberg said the company is working “to mitigate the impact of the update”.

“There are challenges coming to personalized advertising and we are doing a huge amount of work to prepare,” she said.

Facebook has repeatedly blasted Apple over its new requirement, saying the change, which took place this week, would negatively affect its business and hurt small companies that rely on personalized advertising.

Apple Earnings

The tech giant just had another blowout quarter, reporting record revenue of $89.6 billion while topping analysts’ estimates of $77.35 billion. Revenue jumped 54% y/y.

The company reported fiscal Q2 net income of $23.6 billion, up 110% from $11.2 billion a year earlier. Earnings for the three months ending in March came in at $1.40 per share. Analysts were expecting $0.99 a share.

iPhone sales were $47.9 billion, up 65% from $29.0 billion a year ago.

Apple also guided Q3 revenue to be up “strong double digits” and authorized an increase of $90 billion to its existing share repurchase program. Cupertino also raised its dividend by 7% to 22 cents per share.

Apple CEO Tim Cook had the following to say about his company’s Q2 performance:

“This quarter reflects both the enduring ways our products have helped our users meet this moment in their own lives, as well as the optimism consumers seem to feel about better days ahead for all of us,” said Cook.

Price Action

FB traded 22 points higher at $329 & change at press time, while Apple traded 2.81% higher at $137.34

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