Meta’s revenue declines faster than expected, shares drop 14%
A disappointing Christmas quarter prediction reduced Meta’s stock market worth in extended trade by around $40 billion.
The decline accelerated when Meta reported its first-ever decline in revenue in the prior quarter.
Shares of Facebook’s parent company Meta Platforms Inc fell 14% after it predicted a bad holiday quarter and considerable more losses from Metaverse investments in 2019.
In extended trading, the forecast on Wednesday reduced its stock market value by nearly $40 billion. In addition to the unimpressive future, Meta must deal with TikTok’s rivalry, the deteriorating global economy, worries about large spending on the Metaverse, and the constant danger of regulation.
The parent company of Facebook outperformed forecasts for quarterly revenue, which dropped by 4% to $27.7 billion from $29 billion in the previous quarter to conclude on September 30.
According to IBES data from Refinitiv, that deepened a revenue decline started the previous quarter when the company reported its first-ever revenue drop of 0.9 percent. However, that decline was less severe than the 5.6 percent decline Wall Street had anticipated.
Additionally, Meta reported user growth numbers that were broadly in line with expectations, including an increase in the number of monthly active users on its flagship app Facebook year over year.
The company’s prediction that fourth-quarter revenue would be in the $30–32.5 billion range, less below analysts’ projections of $32.2 billion, was more concerning.
Additionally, Meta projected that its full-year 2023 expenses would be in the range of $96 billion to $101 billion, an increase from a previously estimated 2022 expense range of $85 billion to $87 billion.
This includes a projected $2.9 billion in costs for “consolidating our office facilities footprint” between 2022 and 2023.
According to Meta, it is cutting the number of employees in some teams and only investing in headcount growth for “our priority priorities.”
The third quarter’s total costs, which were $22.1 billion instead of $18.6 billion the year before, were more than expected. Analysts predicted approximately $20.6 billion.
The company’s third-quarter net income decreased to $4.40 billion, or $1.64 per share, from $9.19 billion, or $3.22 per share, a year earlier. This was the worst performance since 2019 and the fourth consecutive quarter in which profits decreased.
Analysts had projected a $1.86 per share profit.
According to Ben Barringer, an equity research analyst at Quilter Cheviot, “the concern for Meta is that this suffering is likely to continue into 2023 as cost pressures remain a major struggle and the high currency weighs on overseas profitability.”
A slight increase in users and impressions won’t save you because revenues were down while costs were rising sharply.
One of the biggest ad-dependent digital companies, Meta is the most recent to suffer from a reduction in marketing spending as inflation climbs. Alphabet, the company that owns Google, missed its quarterly revenue projections on Tuesday. Prior to this, Snap Inc., the company behind the photo-messaging app Snapchat, witnessed a 25% decline in share price after reporting the slowest revenue growth since going public five years ago.
We’re developing AI to help eliminate language barriers in the metaverse, so eventually you can talk to almost anyone with the help of real-time speech translations. 🗣️https://t.co/laNZKT7dV3 pic.twitter.com/SA2b6KfRpC
— Meta (@Meta) October 19, 2022
