LinkedIn (LNKD, Financial) reported a huge spike in quarterly sales Thursday, skating past Wall Street’s expectations and setting the stage for its impending sale to Microsoft (MSFT, Financial).
After shaking off a horrible end to 2015, the social media giant posted its second consecutive quarter of considerable growth. Second-quarter revenue came in at $933 million – a 31% annual increase on last year’s $712 million.
Thanks to that surge in revenue, LinkedIn was able to post non-GAAP diluted earnings of $1.13 per share versus 55 cents in the second quarter of 2015. Analysts had anticipated an EPS of just 78 cents on revenue of $898 million.
Overall, LinkedIn finished the quarter with a non-GAAP net income of $153 million, excluding $14 million worth of merger-related costs.
Performance for the quarter was up across the board. Talent solutions sailed past a forecast of $576.3 million worth of revenue and brought in $597 million for the quarter. Meanwhile, a noticeable hike in sponsored content helped LinkedIn’s marketing department surpass expectations of $168.2 million by hitting $181 million.
The site’s ailing user base also experienced a surge in membership over the course of the second quarter – narrowly exceeding expectations to add 450 million cumulative members. Premium subscriptions rose 21% to reach $155 million for the quarter versus just $149 million in the first three months of LinkedIn’s fiscal year.
"LinkedIn delivered another quarter of strong growth," CFO Steve Sordello said in a statement. "We achieved record levels of operating cash flow while continuing to invest heavily across our core member and customer value propositions."
Despite those stellar numbers, it’s worth pointing out that LinkedIn still reported a bigger quarterly loss per share than it did in the second quarter of last year. LinkedIn’s GAAP net loss attributable to common shareholders came in at $119 million for the quarter. The company said this stemmed from a noncash charge of $101 million to record a valuation allowance for a significant portion of its tax assets.
But all that’s unlikely to spook investors as the company braces for the impact of a major impending buyout.
In June, Microsoft announced it had entered into a definitive agreement to purchase LinkedIn in an all-cash transaction valued at some $26.2 billion, inclusive of LinkedIn’s net cash. That equals a price of $196 per share.
The deal is expected to wrap up by the end of the calendar year – and according to LinkedIn CEO Jeff Weiner, it will enable an independent LinkedIn to provide better value to its user base.
“We believe joining forces with Microsoft enables us to further accelerate and scale our ability to deliver value and create economic opportunity for every member of the global workforce,” Weiner said.
Yet the deal will be equally critical for industry pioneer Microsoft, which analysts say has a relatively pockmarked record when it comes to big acquisitions.
Microsoft’s $6 billion purchase of display advertising giant aQuantive in 2007 turned out to be a huge write-off – and the company is still struggling to recover from its ill-fated $7.2 billion purchase of Nokia (NOK, Financial) in 2014. In May, Microsoft announced plans to cut 1,850 jobs and write down some $950 million at Nokia’s struggling smartphone unit.
That being said, Microsoft has experienced better luck with Skype – which it bought for $8.5 billion in 2011.
Because of its pending merger with Microsoft, LinkedIn did not host a conference call for investors Thursday or update its outlook for the remainder of fiscal year.
Disclosure: I do not own shares in any of the companies mentioned within this article.
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