Facebook (FB) reported a top- and bottom-line beat with its first-quarter earnings report after Wednesday's closing bell, delivering on what had become very high expectations even as the company had consistently pointed toward 2017 as an investment year that would be against very tough compares. You can read our analysis from the company's third-quarter 2016 conference call, when management first broached the topic of the 2017 outlook.
FB's first-quarter revenues rose 49% year over year to $8.03 billion, beating consensus estimates for $7.83 billion and EPS of $1.04 (note: FB is now reporting GAAP figures) topped consensus GAAP expectations for $0.87. The stock has been volatile after hours on the news, but we expect shares to continue to adjust as management speaks on the conference call. We remind members that the stock had risen more than 1% this week and almost 32% for the year. Despite cautious commentary from management in recent quarters in terms of the forward outlook, investors continue to bake high expectations into the stock -- rightfully so, in our opinion.
As we have noted following past FB earnings reports, any prolonged pullback following the print has always proven to be a long-term buying opportunity. Despite the hesitation that pressured the stock following its third-quarter 2016 report, shares regained incredible momentum to close out the year and built on the strength this year. Overall, we believe the market has largely digested the cautious commentary for 2017 and has shifted focus to the several growth opportunities ahead, including: monetization of Instagram, WhatsApp and Messenger, as well as continued improvements within the core platform and a ramp-up of virtual reality.
Moving on to this quarter's results, advertising revenue grew 51% year over year to $7.9 billion, beating consensus expectations for roughly $7.6 billion. Ad revenue growth slowed slightly from the fourth quarter's 53%, but is still quite impressive for a company of Facebook's size, and we note that the first quarter is seasonally weaker the fourth quarter as growth initiatives are more limited. In addition, mobile ads accounted for 85% of ad revenue versus 84% in the fourth quarter and 82% a year ago. COO Sheryl Sandberg noted that mobile continues to be a main driver for the company as businesses adapt to reach consumers in the most interactive and effective ways. Facebook and Instagram are the two largest mobile advertising platforms around.
Helping to carry the beat down to the bottom line, the company's effective tax rate was a low 10%. In addition, margins improved from the year-ago first quarter. Explosive growth in advertising and total revenues has given Facebook the leeway to continue to invest and spend to grab current and future sales. Total costs and expenses rose 40%. That being said, capex only grew 12% and totaled $1.27 billion. We note that, with Facebook having set a 2017 capex budget of around $7 billion to $7.5 billion (up over 50% compared to 2016), the rest of the year's spending could be back-end-loaded, a dynamic that could potentially be spooking investors after hours (we view this as nearsighted).
Expenses and investments remain a key item to watch for the year as many investors exhibited initial caution following the last quarter's commentary, as we noted above. That being said, we appreciate management's willingness to invest for future growth, and most importantly, they have proved capable of transforming longshots into long-term growth drivers (e.g., Instagram and Messenger). CEO Mark Zuckerberg and Sandberg have the vision, intuition, execution capabilities and just the right amount of spunk to keep FB powering ahead for years to come, and the confidence in their future prospects is unmistakable (as evidenced by the 38% increase in head count year over year in the first quarter).
Digging deeper into user engagement metrics, FB again beat consensus across the board. Daily active users (DAUs) were 1.28 billion, an increase of 18% year over year and 5% quarter over quarter, compared with consensus of 1.25 billion. Monthly active users (MAUs) were 1.94 billion, a surge of 17% year over year, edging out consensus of 1.81 billion. With these numbers, FB now owns more than 25% of the world's eyeballs on a monthly basis, and that's not accounting for those too young to use the platform or those in areas without access. This is extremely impressive, but also positive in that there remains room for growth.
Supporting this view, North America still accounts for close to half of all revenue, even though the region is only responsible for roughly 12% of MAUs, meaning there is more monetization potential in other regions. Global average revenue per user (ARPU) rose to $4.23 from $3.32 a year ago, evidence that per-user monetization steadily improves. North American ARPU of $17.07 still dwarfs the figures from other regions.
Importantly, DAUs as a percentage of MAUs -- a metric that provides a peek into consistent engagement -- were 66% in the quarter, consistent with recent quarters despite the consistent growth in MAUs and overblown concerns of increased competition. We remind members that these numbers do not include Instagram, Messenger or WhatsApp. We are encouraged that the growth of these ancillary apps has not cannibalized that of the core platform. Facebook is no longer reporting mobile users given that mobile now represents the large majority of all users.
We cannot overstate the importance of FB's growing user base and consistent daily engagement, both on the core platform and subsidiary apps, like Instagram (which reached 700 million MAUs recently, as we discussed in last week's roundup). Engagement is what continues to entice marketers to allocate advertising spend to the company's core platform and other services.
Bottom line: Facebook has mastered how to advertise on mobile and social effectively and profitably while maintaining the incredible user experience. The balance is key in this business in order to keep both users and advertisers happy. Facebook has put together a team that can cater to both sides of the spectrum.
Overall, we view the quarter as representative of a company that continues to have the power to grow even on top of its already massive scale. While short-term traders may harp on the outlook for increasing expenses, tougher taxes compared to this quarter (management is expecting mid-teens moving forward) and refer back to competition concerns (which, at this point, we believe have been noticeably rebuffed) with the stock trading at all-time highs (not to mention profit-taking), we reiterate our belief that this would be a nearsighted view, ignoring all the growth levers FB has to pull moving forward.
Pullbacks following FB's quarters have proven buying opportunities for the long term, and we do not see any reason to think differently this quarter. We believe it is more valuable to view the stock through a long-term lens, and who would want to bet against this name six, 12 or 18 months from now? We will follow trading tomorrow, but do not believe there is anything in this quarter that changes our long-term thesis as the outlook for expenses and deceleration in ad revenue (versus tough compares) is well known. We will be reviewing our price target in the coming days.