Facebook earnings: 54 cents per share, vs estimated EPS of 49 cents

Facebook beats on top & bottom
Facebook beats on top & bottom
Facebook: Strong net profit and margins
Facebook: Strong net profit and margins
Reading Facebook's dip: Pro
Reading Facebook's dip: Pro

Facebook's quarterly results topped analysts' expectations on Wednesday as mobile ad revenue and daily video views rose significantly.

The company posted fourth-quarter earnings of 54 cents per share, up from 31 cents a share in the year-earlier period. Revenue increased to $3.85 billion from $2.59 billion a year ago.

Analysts had expected the company to report earnings of 49 cents a share on $3.77 billion in revenue, according to a consensus estimate from Thomson Reuters.

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"We got a lot done in 2014. Our community continues to grow and we're making progress towards connecting the world," said Mark Zuckerberg, Facebook founder and CEO.

In a post-earnings interview with CNBC on Wednesday, Facebook Chief Operating Officer Sheryl Sandberg said the company now has 3 billion video views per day, a huge increase from 1 billion in September.

"From the advertising side, that give us an opportunity to do more monetization because our ad products always follow our consumer products. When consumers do more video we have the ability to do more video ads" Sandberg said.

Mobile daily active users were 745 million on average for December 2014, an increase of 34 percent year-over-year, the company said.

Daily active users totaled 890 million, up 18 percent, year-over-year. Meanwhile, monthly active users increased 13 percent to 1.39 billion.

The social media giant said advertising revenue jumped 53, year-over-year, percent to $3.59 billion. Mobile ad accounted for about 69 percent of overall advertising revenue, compared to 53 percent last year.

"I think the investments we've made have paid off. When you look at Facebook over the last couple of years, what you see is a shift to mobile," Sandberg said.

After the earnings announcement, the company's shares were last down 1.5 percent in after-hours trading.

"One interesting thing about Facebook is it has almost the highest gross profit margin of any stock on the S&P 500 at 82 percent. So when they beat estimates, that is going to the bottom line and that is set to propel this stock higher," said Brian Evans, portfolio manager at Advisor Shares.

"We can analyze how long people are on it, but the bottom line is that their profits were up 10 percent so that tells me that people are clicking through to ads at least 10 percent more to get to what they want and that's filtering all the way down."

Evans, a Facebook shareholder, said he thinks the stock is currently undervalued. He thinks the stock is valued at "at least $95."

Facebook has struggled to hold on to its young user base as more social platforms enter the space.

The social media giant has lost some 3.3 million U.S. teens—users between the ages of 13 and 17 years old—since 2011, as well as another 3.4 million users in the 18 to 24 category, according to iStrategyLabs's 2014 Facebook Demographic Report.

The dispatch, which was compiled based on Facebook's Social Advertising platform, showed that teens (ages 13-17) on the social network have declined more than 25 percent over the last three years, while users in the 55 and older group soared 80 percent over the same period.

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Capital expenditures for the fourth quarter of 2014 rose 7 percent to $517 million and the company's cash pile totaled $11.20 billion.

"At a time when people are looking across the Internet space and seeing companies that aren't growing, this is a company with the largest scale, the largest ability to grow, and they're doing it," said Tim Seymour, managing partner at Triogem Asset Management.

The company completed a handful of notable acquisitions last year, including mobile messaging platform WhatsApp and virtual reality products maker Oculus VR.

Facebook accounted for about 7.8 percent of the global digital ad market in 2014, up from 5.8 percent in 2013, according to research firm eMarketer. Overall, the global digital ad market grew about 21 percent to $146 billion last year.

"The bigger Facebook gets, it cements its position as one of the most dominant players in digital media, and it has the size and reach to change the rules of digital advertising and convince others to play by them," said Debra Aho Williamson, principal analyst at eMarketer.

Facebook's share of the $40.2 billion worldwide mobile ad market reached 18.4 percent last year, according to eMarketer, an increase from 16.6 percent in 2013.

Last quarter, Facebook said mobile ad revenue accounted for about 66 percent of its overall advertising revenue.

CNBC's Michelle Fox contributed to this report.