On July 28, 2021, Facebook reported $29.077 billion in revenue for the second calendar quarter, a 56% increase from the same period in 2020. Net income reached $10.394 billion. Diluted earnings per share came in at $3.61. These figures are final audited historical data filed with the SEC.
The headline numbers were strong. Management used the earnings call to warn investors that the second half of the year would look very different. CFO David Wehner told analysts that year-over-year total revenue growth rates would decelerate significantly in the third and fourth periods. He pointed directly to Apple's iOS 14.5 update and its App Tracking Transparency framework as the cause. The framework, which forces apps to ask users for permission before tracking them across other apps and websites, had begun rolling out in April 2021. Facebook's advertising business relies on that data to target ads and measure their effectiveness.
User numbers remained large. Facebook's daily active users averaged 1.91 billion in June 2021, and monthly active users reached 2.90 billion as of June 30, 2021. Across its family of apps, daily active people averaged 2.76 billion in June, and monthly active people hit 3.51 billion.
Revenue and Profit Beat Expectations but the Warning Was Clear
Ad revenue for the period was $28.580 billion, also up 56% year over year. That growth rate was higher than analysts had expected. The company's forward guidance tempered any enthusiasm. Wehner said the deceleration in the second half of 2021 would be driven by a natural comparison to the pandemic period, when marketers pulled back and then returned aggressively, and the Apple iOS changes.
The Apple effect was not hypothetical. Facebook had been preparing investors for it since early 2021. The iOS 14.5 update gave users a clear choice to opt out of tracking. Early data suggested a large majority of users were choosing to opt out. That meant Facebook had less visibility into whether an ad led to a sale, making it harder for brands to measure return on investment. Brands who could not measure results would spend less.
Wehner described the situation as a headwind to ad targeting and measurement. He did not quantify the expected revenue loss in dollars. He said the impact would be more pronounced in the third period than in the second, because the iOS 14.5 rollout happened late in Q2.
User Growth Slows in Facebook's Largest Market
Facebook's user numbers showed a familiar pattern: growth in Asia and the rest of the world, stagnation in North America. Daily active users in the United States and Canada were flat versus the previous period. That market is the most valuable for ad sales, and it is effectively saturated. Monthly active users in the region were also unchanged.
Europe added a small number of users. The rest of the world, led by Asia, accounted for most of the growth. The family of apps metrics showed a similar geographic distribution. Facebook does not break out individual user numbers for Instagram, Messenger, and WhatsApp in its filings, so the family metric is the only consolidated view. The 3.51 billion monthly active people across the family means the company's products reach roughly 45% of the world's population.
The Apple Threat Was Not New but the Timing Was
Facebook had been warning about Apple's privacy changes for months before the Q2 report. In January 2021, Mark Zuckerberg told investors that Apple was becoming one of Facebook's biggest competitors. He argued that Apple had every incentive to use its platform position to interfere with how other companies operate. The iOS 14.5 update was the concrete expression of that tension.
The App Tracking Transparency framework required Facebook to show a prompt asking users for permission to track them. Early third-party estimates suggested that fewer than 25% of users opted in. Facebook's ad network lost a large chunk of the data it used to target ads to the right people and to prove to brands that their money was well spent.
Facebook responded by developing alternative measurement tools, including Aggregated Event Measurement, which uses aggregated and anonymized data. The company also pushed marketers to adopt its Conversions API, a server-side tracking tool that works around the iOS prompt. Those workarounds were not perfect. Management was candid that the transition would take time.
Ad Revenue Growth Was Broad but Uneven
Facebook's ad business grew across all regions in Q2 2021, but the growth rates varied widely. The Asia-Pacific region saw the fastest growth at 62% year over year. Europe followed at 56%. The United States and Canada grew 51%, and the rest of the world grew 51% as well. The overall ad revenue of $28.580 billion represented a 56% increase, exactly matching total revenue growth.
The number of ad impressions delivered across Facebook's services increased 6% year over year in Q2 2021. The average price per ad increased 47% in the same period. That price increase drove most of the revenue growth, not volume. Facebook attributed the higher prices to strong advertiser demand and the shift toward more engaging ad formats like video.
But the price increases could not continue indefinitely. Wehner warned that as the iOS headwinds reduced the effectiveness of ads, the prices marketers were willing to pay would eventually come under pressure. The deceleration he forecast for Q3 and Q4 reflected that logic.
Capital Expenditure and Headcount Rose as Facebook Invested in Infrastructure
Capital expenditures in Q2 2021 were $4.5 billion, up from $3.7 billion in the same period of 2020. The company said it was investing in data centers, servers, and network infrastructure to support its growing user base and its push into video and e-commerce.
Facebook also continued to hire aggressively. Total headcount at the end of June 2021 was 63,404, a 32% increase from the prior year. The hiring was concentrated in engineering, product, and sales roles. Facebook was building new products like its audio features and its e-commerce tools, including Facebook Shops and Instagram Shops. These initiatives were designed to reduce reliance on ad revenue by creating transaction-based revenue streams. In Q2 2021, ad sales still accounted for 98% of total revenue.
The company's free cash flow for the period was $8.5 billion, down slightly from $8.9 billion in Q2 2020. Facebook had $64 billion in cash and marketable securities on its balance sheet as of June 30, 2021. It used some of that cash to buy back $6.6 billion of its own shares during the period.
The Second Half of 2021 Was Set Up for a Different Story
Facebook's Q2 2021 results were a high-water mark in several ways. The 56% revenue growth rate was the fastest the company had reported in years. The user base remained enormous. But the narrative shifted entirely to the future, and that future was about deceleration. Wehner's warning was not vague. He said the deceleration would be significant. Investors reacted by sending the stock down in after-hours trading on July 28.
The Apple iOS 14.5 changes were the central concern. Facebook had built a $28.5 billion per period ad business on the ability to track users across the web. That ability was now restricted. The company's workarounds were in their early stages. The third quarter of 2021 would be the first full period in which the iOS changes were in effect. The results would show whether Facebook could adapt quickly enough.
The Q2 2021 results are final. They were published and filed on July 28, 2021, and they represent the last period in which Facebook reported financials without the full effect of Apple's privacy changes. The numbers that followed, for Q3 and Q4 of 2021, would be the first real test of the company's ability to grow when it could no longer track users without their permission.
Key Facts from Facebook Q2 2021 Results
- Announcement Date: July 28, 2021
- Total Revenue: $29.077 billion (56% year-over-year increase)
- Net Income: $10.394 billion
- Diluted EPS: $3.61
- Advertising Revenue: $28.580 billion (56% year-over-year increase)
- Facebook DAUs (June 2021 avg): 1.91 billion
- Facebook MAUs (June 30, 2021): 2.90 billion
- Family DAP (June 2021 avg): 2.76 billion
- Family MAP (June 30, 2021): 3.51 billion
- Status: Concluded. Final audited results filed with SEC on July 28, 2021.
Facebook Q2 2021 Key Financial and User Metrics
| Metric | Q2 2021 Value | Year-Over-Year Change |
|---|---|---|
| Total Revenue | $29.077 billion | +56% |
| Net Income | $10.394 billion | Not provided |
| Diluted EPS | $3.61 | Not provided |
| Advertising Revenue | $28.580 billion | +56% |
| Facebook DAUs (June 2021 avg) | 1.91 billion | Not provided |
| Facebook MAUs (June 30, 2021) | 2.90 billion | Not provided |
| Family DAP (June 2021 avg) | 2.76 billion | Not provided |
| Family MAP (June 30, 2021) | 3.51 billion | Not provided |
| Capital Expenditures | $4.5 billion | +22% |
| Headcount | 63,404 | +32% |
Frequently Asked Questions
What was Facebook's revenue in Q2 2021?
Facebook reported total revenue of $29.077 billion for the second quarter of 2021, a 56% increase from the same period in 2020.
Why did Facebook warn about revenue deceleration in the second half of 2021?
CFO David Wehner said the deceleration was due to two factors: tough year-over-year comparisons with the pandemic recovery period, and headwinds from Apple's iOS 14.5 update, which reduced Facebook's ability to target and measure ads.
How did Apple's iOS 14.5 affect Facebook's advertising business?
Apple's App Tracking Transparency framework required apps to ask users for permission to track them across other apps and websites. Most users opted out, reducing the data Facebook could use for ad targeting and measurement, which made ads less effective and less valuable to advertisers.
How many daily active users did Facebook have in Q2 2021?
Facebook had an average of 1.91 billion daily active users in June 2021. Across its family of apps (including Instagram, Messenger, and WhatsApp), daily active people averaged 2.76 billion.
What was Facebook's net income in Q2 2021?
Net income for the quarter was $10.394 billion, with diluted earnings per share of $3.61.
