Facebook is raking in so much filthy lucre, it can't spend it fast enough

What's it aiming for with all that R&D dosh?

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Facebook beat estimates on both revenue and earnings for the second quarter of its fiscal 2015, but investors seemed taken aback by the social network's soaring spending.

The firm reported revenue of $4.04bn for the three months ending on June 30, which was up 38.9 per cent from the same period a year ago.

Its earnings were also slightly better than Wall Street was expecting, at $0.50 per diluted share.

Its net income was down 9.1 per cent from last year's quarter, however, at just $719m.

Most of that was down to its massively higher costs compared to 2014's quarter. Facebook has said that 2015 will be an "investment year," but that's a bit of an understatement. Its total costs and expenses for the second quarter were $2.77bn, which was 82.2 per cent higher than they were a year ago.

Spending on research and development, in particular, was way up at $1.12bn, a 137.8 per cent annual increase. But sales and marketing costs, too, were up 75 per cent, with second-quarter spending at $626m. Purchases of property and equipment, meanwhile, grew a more modest 17.1 per cent annually, to $549m.

If investors were hoping to see a direct effect of all this spending on Facebook's business, though, they were disappointed. Facebook did grow its audience in Q2, but only at about the same rate as it has in previous quarters.

The social network counted 968 million daily active users in the second quarter, a year-on-year increase of 16.8 per cent. Monthly active users were up 12.9 per cent annually, to 1.49 billion. Of those, 87.2 per cent of daily active users accessed Facebook from a mobile device, as did 87.9 per cent of monthly active users.

Mobile users remain Facebook's most important market. A full 94.7 per cent of the social network's revenue came from advertising in the second quarter, and of that amount, around 76 per cent came from mobile advertising. That's up from 62 per cent of advertising revenue in the second quarter of 2014.

Facebook's ratio of daily active users to monthly active users – a metric sometimes used to measure user engagement with social sites – was 65 per cent in Q2 of 2015, compared to 62.8 per cent in the year-ago quarter.

Still, despite such encouraging signs, investors seemed disturbed that Facebook blew through so much cash in the quarter, and they sent its share price downward by more than 3 per cent in extended trading on the report. ®


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