Facebook parent Meta reported a steeper-than-expected drop in revenue, missed earnings and issued a surprisingly weak forecast that pointed to a second straight year-over-year sales decline. Shares fell in extended trading.
Here’s how the company did it:
- Earnings: $2.46 per share vs. $2.59 per share expected, according to Refinitiv
- Revenue: $28.82 billion vs. $28.94 billion forecast, according to Refinitiv
- Daily Active Users (DAUs): 1.97 billion vs. 1.96 billion expected, according to StreetAccount
- Monthly Active Users (MAU): 2.93 vs 2.94 billion expected, according to StreetAccount
- Average revenue per user (ARPU): $9.82 vs. $9.83 forecast, according to StreetAccount
Meta shares have lost about half their value since the start of the year, underscoring investor concerns about the health of the company’s core online advertising business. That drive has been hit by Apple’s iOS privacy update last year, limiting Meta’s ability to track users, and by a weakened economy that has led some companies to cut their budgets advertising
Second-quarter revenue fell nearly 1% from a year earlier. Meta also issued a disappointing forecast for the third quarter, citing a “continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is driven by broader macroeconomic uncertainty.”
The company said sales for the quarter will be between $26 billion and $28.5 billion, behind the average analyst estimate of $30.5 billion, according to Refinitiv. This translates into a projected decline of between 2% and 11% compared to a year ago.
Facebook’s troubling results follow a trend started last week by rivals Snap and Twitter. Those companies reported disappointing second-quarter numbers, with executives citing economic and mobile platform challenges that have permeated the online ad market. The mood had soured so much this week that shares of Alphabet and Microsoft rose on Wednesday, even though both companies missed analysts’ estimates on the top and bottom lines.
Meta said its workforce rose 32% from a year earlier to 83,553. However, the company indicated earlier in the period that it plans to slow the pace of hiring, echoing the sentiment of many of its tech peers.
The company also expects its total expenses in 2022 to be between $85 billion and $88 billion instead of $87 billion to $92 billion, indicating that the company is tightening its belt.
Meta’s Reality Labs business unit, responsible for developing the metaverse and related virtual reality and augmented reality technologies, had sales of $452 million but reported a loss of $2.8 billion in the second quarter. This business unit is also expected to generate less cash in the third quarter compared to the second, Meta added.
As the company continues to push the idea of the metaverse as part of its corporate rebranding, it’s also spending more on marketing and sales; costs associated with marketing and sales rose 10% year over year to $3.6 billion in its second quarter.
Earlier this week, Meta raised the price of its Quest 2 VR headset by $100, citing increased production and shipping costs. Although Meta is currently the leader in VR headset sales, the market is still small compared to mobile advertising.
With Facebook struggling to meet the demands of Wall Street, CFO David Wehner is taking on a new role as chief strategy officer, overseeing corporate development, the company said. Meta is promoting Susan Li, the company’s current vice president of finance, to chief financial officer.
Executives will discuss the results with analysts in a webcast beginning at 5:00 pm ET.
This story is developing.
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