Facebook stock jumps 7% as pandemic helps make its audience even bigger

Facebook (FB) said Thursday that it had 2.7 billion monthly active users at the end of the June quarter, a 12% increase from the prior year. When factoring in all of Facebook’s various apps, including Instagram and WhatsApp, the company topped 3 billion users for the first time.

With more eyeballs, Facebook also saw revenue grow 11% to nearly $18.7 billion for the second quarter, even as the broader economy contracted.

The company said its daily and monthly active users 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 said as stay at home orders begin to ease, it expects engagement to be flat or to slightly decline in the next three months, compared to the past quarter.

Facebook’s stock jumped more than 7% in after hours trading Thursday following the earnings report.

The earnings release comes at a sensitive moment for the company. On Wednesday, Facebook CEO Mark Zuckerberg appeared before Congress along with CEOs from Apple (AAPL), Amazon (AMZN) and Google parent company Alphabet (GOOGL), where they were grilled about their competitive tactics.

On a call with analysts, Zuckerberg and other Facebook executives repeatedly played up how much they believe the platform helps small businesses and that significant changes could hit the broader economy.

Four tech titans go before Congress

“I’m troubled by the calls to go after internet advertising, especially during a time of such economic turmoil like we face today with Covid,” Zuckerberg said. “It’s true that making it more difficult to target ads would affect the revenue of companies like Facebook. But the much bigger cost of such a move would be to reduce the effectiveness of the ads and opportunities for small businesses to grow. … it would probably be felt at a macroeconomic level.”

“Is that really what policymakers want in the middle of a pandemic and recession?” Zuckerberg added.

Zuckerberg reused some of his prepared remarks from yesterday’s hearing on the call, touting the tech industry as an “American success story,” and saying that “the products we build have changed the world for the better and improved people’s lives.”

“Since Covid emerged, people have used our services to stay in touch with friends and family who they can’t be with in person, and to keep their businesses running online even when physical stores are closed,” Zuckerberg said on the call. “In many ways amidst this very difficult period for people around the world, our services are more important now than ever before.”

Facebook is also confronting a major advertising boycott that includes numerous household brands, such as Hershey’s, Starbucks and Patagonia. A civil rights coalition that includes the Anti-Defamation League and the NAACP launched the #StopHateforProfit campaign, calling on major companies to halt advertising on Facebook for the month of July due to the platform’s “repeated failure to meaningfully address the vast proliferation of hate on its platforms.”

But whatever financial impact there may be from the boycott would not be seen during the second quarter, which ended in June.

Facebook CFO Sheryl Sandberg pointed to the company’s meeting with the organizers of the boycott to listen to their concerns, as well as publishing an independent, two year civil rights audit. “It’s clear we have a lot more to do and we’re working every day to meet this challenge, not because of pressure from advertisers, but because it is the right thing to do,” she said.

While some brands have committed to pause spending through the end of this month, others such as household goods giant Unilever are halting advertising through the end of the year across social media, not just Facebook. However, much of Facebook’s ad revenue comes from small and medium-sized businesses, which could potentially protect it from a significant revenue shortfall.

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