Social media giant Facebook reported a surge in its revenue but says its daily and monthly active users in the US and Canada declined.
According to Facebook, its revenue went up by 22% to $21.47 billion compared to last year while its net income surged by 29% to $7.85 billion year-over-year. These numbers were higher than analysts' forecasts.
Despite the revenue growth, Facebook expressed concern over its declining daily and monthly active users in the US and Canada in the third quarter compared to the previous three months.
Great financial performance, declining active users
During the quarter ending in September, the social media firm recorded a 12% increase in monthly active users, reaching 2.74Â billion. If its various apps, including Instagram, Messenger and WhatsApp, were combined, the total number of users during the period is 3.21 billion, reflecting a 14% growth.
According to Facebook, these numbers "reflect increased engagement as people around the world sheltered in place and used our products to connect with the people and organizations they care about."
However, the company pointed out that as stay at home orders begin to ease, it expects the number of active users to be flat or to slightly drop in the future. It already observed declines in the US and Canada during the quarter.
From 198 million a quarter earlier, the number of Facebook users in US and Canada fell to 196 million. According to the tech giant, its U.S. and Canada user base had broadened during the second quarter, reflecting the impact of the coronavirus pandemic.
Following the earnings report, Facebook shares initially went up then fell by around 3% before recovering slightly into positive territory in after-hours trading.
Company Outlook
In its earnings report, Facebook stated: "We believe the pandemic has contributed to an acceleration in the shift of commerce from offline to online, and we experienced increasing demand for advertising as a result of this acceleration. Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth."
The social media firm also mentioned other challenges in the report, including changes to the iPhone software that could impact its advertising business, as well as the "evolving regulatory landscape."
The quarterly report was released following a Senate inquiry into several tech companies' content practices. Facebook chief executive officer (CEO) Mark Zuckerberg faced the Senators on the Commerce Committee, along with Twitter CEO Jack Dorsey and Google CEO Sundar Pichai.
Zuckerberg said: "We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times."
The positive financial numbers during the period represents a bounce back from the previous pullout of advertisers.
eMarketer principal analyst Debra Aho Williamson said: "Facebook has rebounded nicely from both the early-pandemic advertiser pullout, when marketers pulled ads across all media to redo messaging or conserve funds, and from the July ad boycott."
"Despite its challenges with election turmoil and content moderation, it remains a go-to for advertisers seeking to engage a broad base of consumers," Williamson added.
