Parent Facebook Meta reported a steeper-than-expected revenue decline, missed earnings and issued a surprisingly weak forecast pointing to a second straight year-over-year sales decline. Shares slid 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 expected, according to Refinitiv
- Daily Active Users (DAU): 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 expected, according to StreetAccount
Meta shares have lost about half their value since the start of the year, underscoring investor concern about the health of the company’s core online advertising business. This unit was wounded by Apples iOS’s privacy update last year, limiting Meta’s ability to track users, and a weakening economy that led some companies to cut advertising budgets.
Second-quarter revenue fell nearly 1% from a year earlier. Meta also released a disappointing third quarter forecast, citing “the continued 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 would be between $26 billion and $28.5 billion, lagging analysts’ average estimate of $30.5 billion, according to Refinitiv. This translates to an expected decline of 2-11% from a year ago.
Facebook’s troubling results follow a trend started last week by its rivals Instantaneous and Twitter. These companies both reported a disappointing second quarter Numbers, and executives cited economic and mobile platform challenges that have permeated the online advertising market. The mood had deteriorated so much this week that actions of Alphabet and Microsoft rose on Wednesday even as both companies missed analysts’ estimates of higher and lower results.
Meta said its workforce increased 32% from a year earlier to 83,553. However, the company noted earlier in the period when it plans to slow the pace of hiring, echoing the sentiment of many of its tech peers.
Meta’s Reality Labs business unit, responsible for developing the metaverse and related virtual reality and augmented reality technologies, had revenue of $452 million, but posted a loss of $2.8 billion. dollars in the second quarter. This business unit is also expected to generate less cash in the third quarter compared to the second, Meta added.
Earlier this week, Meta raised the price of its Quest 2 VR headset by $100, citing rising production and shipping costs. Although Meta is currently the leader in selling VR headsets, the market is still tiny compared to mobile advertising.
As Facebook struggles to meet Wall Street demands, chief financial officer David Wehner is taking on a new role as chief strategy officer, overseeing the company’s development, the company said. Meta promotes Susan Li, the company’s current vice president of finance, to chief financial officer.
Executives will discuss the results with analysts during a webcast beginning at 5:00 p.m. ET.
This story is developing.