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3 Things to Watch For in Facebook’s Earnings Report

Inside The F8 Facebook Developers ConferenceInside The F8 Facebook Developers Conference
Facebook CEO Mark Zuckerberg.Photograph by Bloomberg via Getty Images

Facebook (FB) is scheduled to release its third-quarter earnings report on Wednesday after the market closes. Here are three things we should all be watching for in the report, according to The Wall Street Journal:

Apps: Mark Zuckerberg has said that Facebook is building a “family” of apps and that it will begin to monetize those apps once their user bases reach 1 billion. Whatsapp is fairly close to the mark at 900 million users, so investors will likely be curious about the company’s revenue prospects for the app and its plans for monetization. Instagram was recently opened up to broader advertising, providing advertisers in over 30 countries with a “self-serve” option. Ken Sena, an analyst with Evercore ISI, expects the photo-sharing app to contribute up to $300 million, about 5% of Facebook’s total revenue.

Spending: Facebook plans to invest in a variety of projects in the near future, including virtual reality and artificial intelligence, two increasingly popular investments for tech companies lately. The company is also working on an initiative to provide less advanced countries with Internet connectivity. Colin Sebastian, an analyst at Robert W. Baird & Co., predicts that research and development spending will escalate, and others expect Facebook to report a 60% profit margin for the third quarter, down from 64% last year.

Video Ads: Facebook announced in July that its video advertisements were notably increasing revenue. However, Bernstein Research analyst Carlos Kirjner says it implausible for advertisers to spend as much on Facebook video ads as they do on YouTube ads because the latter provides a platform for original content, and Facebook simply reposts what’s already out there. Investors will likely be looking to see if the company has plans to update its video advertising strategy.

The Journal reports that Facebook is expected to report earnings of 52 cents per share, up from 43 cents last year, an increase of 21%. Its third quarter revenue is forecasted to be 36% higher than last year at $4.37 billion.