Facebook beats the street thanks to stellar ad sales

Earnings jumped by 52% in the fourth quarter and free cash flow nearly doubled.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Social media giant Facebook Inc (NASDAQ: FB) posted solid fourth-quarter 2020 results on Wednesday evening. The company exceeded Wall Street's expectations across the board and boosted its share buyback program by $25 billion.

Facebook's revenue rose 33% year over year, landing at $28.1 billion. GAAP earnings jumped 52% to $3.88 per diluted share. The average analyst had been forecasting earnings of roughly $3.19 per share on sales near $26.3 billion.  

The company achieved its stated goal of accelerating its ad revenue growth, lifting that key metric from 22% in the third quarter to 31% this time. Free cash flow rose 91% to $9.22 billion.

The company's active user counts continued their steady climb at low-teen to mid-teen percentage rates year over year. Facebook had 1.84 billion daily active users in December.

CFO David Wehner highlighted two macroeconomic trends that helped the company exceed expectations in the quarter. A global shift toward online commerce was accompanied by higher consumer demand for products and lower interest in services. These two tendencies combined to serve as a tailwind to Facebook's advertising growth.

Looking ahead, Wehner said he expects easy year-over-year comparisons in the first half of 2021 as the company will be measuring its progress against the weak advertising environment that prevailed during the early stages of the coronavirus pandemic.

Encouraged by these results and current business trends, Facebook refueled its share repurchase program with a $25 billion injection. The previous authorisation of $34 billion had $8.6 billion left, so the move brings Facebook's capacity to buy back its shares to roughly $34 billion again.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anders Bylund has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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