Facebook (FB), the world's largest social network, is trading modestly lower this morning after reporting Q1 results last night. EPS rose 73% YoY to $1.04. Revenue rose 49.2% year/year to $8.03 bln. Both numbers were much better than expected. In terms of key metrics, Daily active users (DAUs) were 1.28 billion on average for March 2017, an increase of 18% YoY. Monthly active users (MAUs) were 1.94 bln as of March 31, 2017, an increase of 17% YoY.
Mobile advertising revenue was $6.7 bln, up 58% YoY, with growth again being broad-based across regions, marketer segments, and verticals. Mobile represented approximately 85% of advertising revenue for Q1, up from 82% a year ago. On the call, FB talked about how more businesses around the world are shifting to marketing on mobile.
Over 70 mln businesses are now using Facebook Pages around the world on a monthly basis, and more and more of them are becoming advertisers. Over 5 million businesses are actively advertising on Facebook, including more than 1 million in emerging markets. Most of these advertisers start by using the free Pages product because it's easy to use. Its Creative Hub is providing tools that make it easier to create ads optimized for mobile, thumb stopping creative that is. Marketers can see previews of their ads across Facebook and Instagram before rolling them out and get tips to help drive business results.
Another priority is developing innovative ad products that help businesses make the most out of their campaigns. FB continues to improve Dynamic Ads, which enable advertisers to promote their full range of products across all devices. Advertisers can now target Dynamic Ads to broad audiences and are seeing great results.
FB is also helping marketers use video to capture shoppers' attention. People are watching more video on Facebook than ever before, and it's changing how they connect with businesses. In Q1, FB introduced a new ad format called Collection. Collection helps marketers tell stories on mobile by combining creative videos or photos of product images. Clicking on the products leads to an immersive shopping experience, driving purchase consideration and ultimately sales. For example, adidas created a video highlighting the innovative future of a Z.N.E. road trip party. Using the Collection ad format, adidas featured four more items from their product catalog below the video.
So why is the stock down? It's not entirely clear, but FB did say on the call that it expects desktop ad revenue growth rates to slow in Q3 when the company begins to lap its efforts to limit the impact of ad blockers. Also, toward the end of the prepared remarks on the call, FB said there are going be a number of initiatives that are valuable to the Facebook community that will require some spending which are going be net negative on operating margin.
Also, FB is embarking on what it calls a "significant ramp up in infrastructure" supporting global growth. Perhaps these comments are weighing on the stock although they do not seem to be that big of a deal. Also, you have to consider that the stock has run more than 30% YTD and it's was up more than 10 pts since early April. There may be a bit of a sell-the-news reaction as well.