Here are three key factors to watch in Facebook’s earnings report that could propel the stock

Published Wed, Jul 28 20219:32 AM EDTUpdated Wed, Jul 28 202110:34 AM EDT

No metric will be more important for measuring the health of Facebook's business in its second-quarter earnings results than the company's advertising revenue. That's because this quarter will be the first for the social media company since Apple released a key iPhone software update in April . The update, known as iOS 14.5, allows iPhone and iPad users to limit companies from tracking their device's activity. This makes it difficult for companies like Facebook to target users with personalized ads. No company complained more about the impact of iOS 14.5 than Facebook , which warned that the change to the Apple software would impact small businesses' ability to market to their customers. For a while now, Facebook has warned investors to brace for "ad targeting headwinds" related to Apple's changes, as well as others in the internet landscape . The social media giant is scheduled to release earnings after Wednesday 's closing bell. Facebook's revenue for the second quarter, its guidance for the rest of the year and any commentary from the company's executives during its earnings call will be telling. This quarter's results could provide insight as to how many users opted to restrict Facebook's tracking and whether the social media company has been able to navigate those restrictions. "The changes went into effect during the quarter, and we're still seeing the rollout of the 14.5 update," said Debra Aho Williamson, principal analyst at eMarketer. "I'm going to be very curious." Already, Facebook's peers have navigated the challenge's of iOS 14.5 with few setbacks. Snap , for example, was not as affected by the Apple update as it had anticipated, telling analysts on its earnings call on Thursday that it had observed "higher opt-in rates than we are seeing reported generally across the industry." Twitter echoed the sentiment , telling shareholders that the effect of Apple's changes was lower than expected. Both companies did warn that the long-term impacts of iOS 14.5 remain to be seen, but so far, the early returns have been promising. Here are three Facebook storylines to follow when the company announces its second-quarter earnings: 1. Facebook's commerce business In an effort to combat the restrictions of Apple's iOS 14.5 update, Facebook has been ramping up its efforts to bring more commerce directly into its own apps. It did this last year by introducing Facebook Shops and Instagram Shops, and more recently, the company announced plans to introduce more ways for creators to promote shoppable products through their Instagram accounts. Further, Facebook in June announced plans to bring shops to its WhatsApp messaging service. By having users make purchases from advertisers directly on its own apps, Facebook is able to directly measure the effectiveness of its ads and provide those stats to advertisers. Already, Facebook claims more than 300 million monthly Shops visitors and 1.2 million monthly active Shops across its apps. Any updates from Facebook regarding its commerce efforts will be worthwhile for investors. "While Q2 is not historically a big commerce quarter, social commerce is clearly coming into its own," said Ron Josey, JMP Securities managing director. 2. Covid's impact on app usage Investors will want to know whether the economic reopening and the expansion of Covid-19 vaccines have affected the amount of time users spend on Facebook and its various apps . A year ago when people worldwide were forced indoors, Facebook and other consumer apps saw their usage skyrocket as people sought to stay connected. Now, investors will want to know if that usage has taken a hit or will it continue growing. "Now that people are out and getting around, are they posting more or are they living in the real world? What are they doing?" said Kim Forrest, chief investment officer of Bokeh Capital. Adding a twist to this, however, is the growing spread of the delta variant of the coronavirus . As cases start to rise again in the U.S., investors will want to know what kind of effect, if any, the delta variant could have on Facebook usage. 3. The regulatory outlook Facebook has been under the microscope of lawmakers and regulators worldwide since the company's March 2018 Cambridge Analytica scandal , in which it was reported that a political consulting firm had improperly accessed the data of 87 million Facebook profiles in a bid to influence the 2016 presidential election. This quarter included some major news regarding all of that regulatory pressure. Most notably, Facebook scored a major win in late June when a federal court dismissed an antitrust complaint from the Federal Trade Commission against the company as well as a parallel case brought by 48 state attorneys general. Those fights aren't quite over just yet , but they certainly relieved some of Facebook's headaches. Further, the company came under more scrutiny in July when the Biden administration scolded the social media company for not doing enough to combat misinformation on its services that discourage people from taking Covid vaccines. At one point, President Joe Biden said " they're killing people " in regards to the misinformation on Facebook. Hearing directly from Facebook's leaders on their outlook for regulatory pressure following these two developments would be welcome insight for investors. "Getting out from underneath the FTC investigation, for the moment, takes a big weight off of Facebook's back, but the regulatory environment isn't getting any easier anytime soon," said Daniel Newman, principal analyst at Futurum Research.

Facebook Chairman and CEO Mark Zuckerberg.

Erin Scott | Reuters

No metric will be more important for measuring the health of Facebook's business in its second-quarter earnings results than the company's advertising revenue.