Facebook Looks More Likely To Spend Capex Guidance For The First Time

Facebook Inc FB announced strong Q2 results across the board, driven by the growing contribution from Instagram.

Pacific Crest’s Evan Wilson maintains a Sector-Weight rating on the company.

Solid Q2

The company reported its revenue and EBITDA for Q2 at $6.44 billion and $4.35 billion, respectively, ahead of the estimates.

The EBITDA margin came in at 67.6 percent, ahead of the estimate of 64.3 percent.

High Capex

However, capex was higher than anticipated, at $1 billion, as compared to the estimate of $850 million, “which is opposite from the historical trend but similar to last quarter,” Wilson mentioned.

Related Link: Facebook Has Missed Earnings Estimates Just Once Since 2012 IPO

“Facebook is ramping spending across the business and looks more likely to actually spend to its capex guidance for the first time as a public company,” the analyst said.

Instagram Drives Acceleration

Wilson noted that there was robust acceleration in the third full quarter since Facebook began to monetize Instagram, with revenue growing 59 percent year-on-year, from 52 percent in Q1.

The analyst believes Instagram is “a primary driver of upside, so investors should still have robust confidence in a fairly easy 3Q16 comparison before comparison becomes more challenging in 4Q16.”

Facebook’s revenue growth is being driven by ad load, with impressions growing 49 percent year on year, versus the estimate of 32 percent. CPM grew 9 percent, meaningfully beating the estimate.

At time of writing, Facebook was seen trading at $126.89, up 2.88 percent on Thursday.

Full ratings data available on Benzinga Pro.