Facebook Parent Reports First Ever Revenue Decline

Ticker Symbol: META

Shares in Meta Platforms were down 5% in the after-market-close trading session today, as the company missed its second-quarter earnings estimates on both the top and bottom lines. Following a weak report from competitor Snap Inc, investors were largely expecting the parent company of Facebook to report numbers that would fall short of expectations. The company also announced plans for a transition in the Chief Financial Officer role as current CFO David Wehner moves to a newly created Chief Strategy Officer role.

The company reported revenue that missed the average analyst estimate by approximately 13 million, coming in at $28.82 billion versus the $28.95 billion estimate. The figure was down 0.9%, declining for the first time on a year-over-year basis. More crucially, Meta also projected that third-quarter revenue would be between $26 to $28.5 billion, short of the average forecast of $30.3 billion. At the midpoint, the guidance was 10% short of analysts’ expectations. Adjusted earnings per share were $2.46, slightly missing estimates of a profit of $2.54 per share.

Critically, Facebook did report a beat in daily active users for the quarter. Currently, 1.97 billion people use the firm’s platform daily on a global basis, versus the 1.96 billion that was estimated. The figure is a 10 million increase over the first quarter. The DAU figure has missed investors’ recent forecasts, so a break in the trend would have been welcomed by shareholders. The average price per ad, however, declined by 14% year over year worse than the 9.7% decline expected by analysts. That metric was offset by the total ad impressions which were up 15%, allowing total ad revenue to rise slightly over 2021.

Reality Labs, Meta’s Oculus division, reported revenue of $452 million, slightly beating estimates of $451.4 million. Operating loss at the division however ballooned up to $2.8 billion. The company explained its decline in aggregate revenue by blaming a weak advertising demand environment which has been “driven by macroeconomic uncertainty.” Foreign exchange headwinds are also expected to impact financial performance by 6%. On a positive note, management did cut expenses guidance by another $2 billion.

Meta has struggled to compete with ByteDance’s TikTok app. Its Instagram has added features recently to compete more directly with TikTok called “Reels” which has been met with lukewarm reactions by users. Despite announcing a hiring slowdown, the company added more than 5,700 jobs during the quarter as well. Total headcount came in at 83.3 thousand employees, versus the 80.2 thousand expected by Wall Street. The company said the new Chief Financial Officer would be Susan Li, who has been with the company since 2016.

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