Facebook Expects Currency Issues to Have a Larger Impact in 2Q15
Facebook Announces Mixed 1Q15 Earnings (Part 5 of 5)
Facebook’s expenses grew much faster than its revenue
Facebook (FB) considers 2015 to be big investment year for itself. In 1Q15, Facebook’s total non-GAAP (generally accepted accounting principles) operating expenses grew by 83% YoY (year-over-year), while its GAAP expenses grew by 57%.
This is much more than the 42% YoY growth that it achieved for its revenue in 1Q15. The revenue growth was largely impacted by the strong US dollar (UUP) during the last quarter. Facebook mentioned that its revenue growth could have been 49% instead of 42% if there hadn’t been currency issues.
Facebook derives more than half of its revenue from international markets, as the above chart show. This makes currency issues prominent. The concern for Facebook is that the currency issues could play an even larger role going forward. According to Facebook, in March, currency headwinds negatively impacted the YoY revenue growth by 10%. Based on this, Facebook believes that the currency headwinds in 2Q15 will be greater than 1Q15.
Facebook is also looking to increase its spending for the rest of the year. The company expects its spending on operating expenses to increase by 55%–65% this year compared to last year. Facebook also expects a YoY increase of 64% for its capital expenditures. This will mainly be used to build data centers and infrastructure.
Currency issues impact the overall large cap sector
However, it isn’t just Facebook. The whole large cap tech sector has been impacted by the strengthening US dollar. Google (GOOG) (GOOGL) announced its earnings on April 23. It mentioned that currency headwinds shaved off 5% from its overall YoY revenue growth in 1Q15. eBay (EBAY) also announced its earnings on April 22. It mentioned that currency issues impacted its YoY revenue growth by 5%. Apple (AAPL) will announce its earnings on April 27. It also expects 5% revenue growth.
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