As Q2 Earnings Approaches, the Street Stays Bullish on Facebook's Mobile Prospects

Facebook's S-1 filing in early 2012 came with a rude awakening we're all quite familiar with by now: The world is going mobile, and Facebook's ad business needed to adapt fast in order to keep up with it.

Now, as Facebook prepares to report its second-quarter earnings this afternoon, something has shifted: Wall Street is actually optimistic about Facebook's mobile monetization prospects.

The Street's consensus calls for earnings per share of 14 cents on revenue of $1.62 billion, an estimate up from the EPS of 12 cents on revenue of $1.18 billion reported during Q2 of last year.

"While quarterly results at FB will likely remain volatile, we remain bullish on the direction and growth trajectory of the company," Sterne Agee analyst Arvind Bhatia wrote in a research note this week.

The biggest boon for some? The trending surge in Facebook's mobile revenue figures seen in recent quarters.

Mobile revenue accounted for nearly 30 percent of Facebook's ad business in the first quarter of this year, which was already a jump up from 23 percent in the fourth quarter of 2012. That's expected by some analysts to grow, albeit slightly, to a daily run rate of nearly $5 million on mobile ads alone.

Facebook has made it clear that at least one of its more recent ad products - mobile app installation ads - has been quite successful in driving growth, and J.P. Morgan's Doug Anmuth expects that to continue.

"We remain bullish as we believe ad dollars are increasingly shifting to online, mobile, and social and we expect Facebook to capture a growing portion of ad budgets going forward," Anmuth wrote in a research note.

The big unknowns are the usuals that we'll be looking for. Will the company break out any metrics beyond its usual stats on daily and monthly active users? That may be something to watch for, given Facebook's increasing competition for mindshare from other mobile-based sites like Snapchat, WhatsApp and International competitors like Line and KakaoTalk.

Perhaps Facebook will detail some engagement-based stats that could rebut the chatter that the social giant is losing its cool with younger audiences.

Another wild card: The oft-speculated eventual appearance of auto-play video ads in the News Feed. Bhatia and Anmuth both expect the ads to debut in the latter half of the year, a potential multibillion-dollar revenue-driving opportunity for the company. "We see online video advertising as a key incremental growth driver for FB in 2014," Bhatia wrote.

And lastly, the payments question still remains. Driven largely by social games on the platform, Facebook's payments business has changed much over the past two years, again a result of the sweeping shift to mobile. Zynga, which once reigned supreme as Facebook's largest gaming partner, has taken a drastic hit as users have moved away from playing games on the desktop to more casual gaming on the phone and tablet.

As a result, Facebook's payments revenue cut has flattened. The past year has seen Facebook try to distance itself from being too connected to Zynga, giving way to the rise of other smaller, more mobile-focused gaming outfits like King and, to a lesser extent, Wooga.

Analysts expect flat sequential revenue in the payments business, though a slight uptick in year-over-year growth.

I'll be covering the print as it hits the wire at 1 pm PT, with a liveblog of the earnings call from my colleague Peter Kafka to follow.

Facebook Beats as Mobile Revenue Jumps to 41 Percent of Ads Business

Facebook's numbers are in, and they look good across the board - especially in mobile.

The social giant posted its second-quarter earnings on Wednesday afternoon, reporting earnings per share of 13 cents on revenue of $1.81 billion. That beats analysts' expectations of an EPS of 14 cents on revenue of $1.62 billion.

But the biggest point of interest here is in the breakdown of Facebook's revenue numbers. Mobile revenue, the most closely watched part of Facebook's business, accounts for 41 percent of Facebook's total revenue. That's a leap from accounting for nearly 30 percent just last quarter.

"One of the things this quarter says to us is that News Feed ads work," Facebook CFO David Ebersman told AllThingsD in an interview. "They're really creating compelling returns for our advertisers."

Facebook has faced intense criticism from investors over the past year and a half, as Wall Street voiced concerns that the company couldn't adeptly handle the massive shift from desktop to mobile use. Most of Facebook's advertising products were optimized for desktop users for as long as the company has been around, and only over the past year has it tried to shift toward a "mobile first" environment.

The company, however, has made some inroads with new mobile advertising products - in particular with its mobile app installation ads aimed at application developers.

"They're growing very rapidly," Ebersman said of the ad product. "And we're enthusiastic because the app ecosystem is such a fast-growing and dynamic area - developers need effective ways to help people discover what they have built."

As far as overall user growth, Facebook is still increasing in both new users and engagement. Facebook's daily active users increased to 699 million, a jump of 27 percent year over year. And monthly active users swelled to 1.15 billion, a 21 percent increase year on year.

But again, the biggest number of note here is the mobile MAU number. Monthly active users on mobile jumped to 819 million, an increase of 51 percent year over year. Talk about a shift from desktop to mobile.

"We've made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile," CEO Mark Zuckerberg said in a canned statement. "The work we've done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future."

Facebook's stock is up nearly 20 percent in after hours trading, hovering around $31 per share.

Tune in to my colleague Peter Kafka's live coverage of the earnings call here.

Amazon's Q2 Is a Miss

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First quick look at Amazon's earnings numbers, and it's a miss.

The online retail giant posted a loss, at an EPS of minus two cents on revenue of $15.7 billion.

Though Amazon's net sales rose 22 percent compared to the year-ago quarter, it's a disappointing miss against analysts' expectations that the company would post earnings per share of four cents to six cents on $15.74 billion in revenue.

"This past quarter, our top 10 selling items worldwide were all digital products - Kindles, Kindle Fire HDs, accessories and digital content," CEO Jeff Bezos said in a canned statement. (Of course, with no actual sales numbers on the amount of Kindle products sold - as always.)

Not a ton of color in this release as to why Amazon missed, nor are there any notes on AmazonFresh, the company's experimental grocery delivery service. Hopefully, CFO Tom Szkutak will address these points on the conference call with analysts coming up shortly.

Shares of Amazon were trading off around two percent on the news, at around $297 per share.