Facebook reported an 11% increase in revenue in Q2 to $18.7 billion. Although this was the slowest growth recorded since its 2012 IPO, it was well ahead of consensus estimates of $17.4 billion. Looking ahead, Facebook is projecting revenue growth of about 10% in Q3.
Facebook reported EPS of $1.80 representing an increase of 90% and well ahead of estimates of $1.39 per share.
Perhaps most impressively, Facebook reported record free cash flow of $7.3 billion compared to $5.3 billion in Q2 2019. On a trailing twelve-month basis, Facebook generated over $22.5 billion in free cash flow putting the company on a free cash multiple of 29x.
Facebook daily active users were 1.79 billion on average for June 2020, an increase of 12% year-over-year. Monthly active users were 2.70 billion, an increase of 12% year-over-year. This is an astonishing figure suggesting that 23% of the global population are active users of the various Facebook platforms on a daily basis. As a reminder, Facebook also owns Instagram and the messaging service platform Whatsapp.
The results are especially impressive when one considers that there currently is a boycott by more than 1,100 major companies that have objected to hate speech, violent content and misinformation on Facebook’s various digital platforms. Facebook has resolved to deal with the issues, and we are confident that they have the financial muscle to overcome this obstacle. Given the sheer penetration levels of Facebook we also doubt whether major companies can afford to boycott the various Facebook platforms indefinitely. Facebook currently has more than 9 million active advertisers, the majority of which are small businesses.
Although Facebook faces significant regulatory headwinds as well as increased scrutiny from advertisers, we still feel that the company has significant scope to grow especially in emerging markets where average revenue per user is a fraction of that in developed markets. With nearly 25% of the world population accessing a Facebook application daily, we feel that the current 30x free cash flow multiple is not overly excessive and are happy to hold the company in our global portfolios.
