Meta reports earnings, revenue declines and forecasts second consecutive quarter of declining revenue – CNBC | Hot Mobile Press

Facebook parent Meta reported a sharper-than-expected decline in sales, missed profits and issued a surprisingly weak guidance that points to a second straight year-on-year decline. In extended trading, the stock fell 3.8%.

Here’s how the company did it:

  • Merits: $2.46 per share versus $2.59 per expected share, according to Refinitiv
  • Revenue: $28.82 billion versus $28.94 billion expected, according to Refinitiv
  • Daily Active Users (DAUs): 1.97 billion versus 1.96 billion expected, according to StreetAccount
  • Monthly Active Users (MAUs): 2.93 versus 2.94 billion expected, according to StreetAccount
  • Average revenue per user (ARPU): $9.82 vs. $9.83 expected, according to StreetAccount

Meta shares are down about half their value since the beginning of the year, underscoring investor concerns about the health of the company’s core online advertising business. That unit was damaged last year by Apple’s iOS privacy update that limited Meta’s ability to track users, and by a flagging economy that prompted some companies to cut their advertising budgets.

Revenue fell nearly 1% year over year in the second quarter. Meta also issued disappointing guidance for the third quarter, citing a “continuation of the weak advertising demand environment we experienced in the second quarter, which we believe reflects broader macroeconomic uncertainty.”

Speaking to analysts, Meta CEO Mark Zuckerberg said the company will be cutting headcount over the next year as it tightens its belt for the economic slowdown.

“This is a time that requires more intensity, and I expect we’ll do more with fewer resources,” Zuckerberg said.

Third-quarter revenue will be between $26 billion and $28.5 billion, according to Refinitiv, falling short of the average analyst estimate of $30.5 billion. This corresponds to a forecast decrease of 2% to 11% compared to the previous year.

Facebook’s troubling results follow a trend started last week by rivals Snap and Twitter. Both companies reported disappointing second-quarter results, and executives cited economic and mobile platform challenges that have permeated the online advertising market. Sentiment had deteriorated so badly this week that shares of Alphabet and Microsoft rose on Wednesday, even as both companies missed analyst estimates for revenue and earnings.

Reels is fighting for monetization

An additional challenge for Meta is the continued growth of short-video app TikTok, which is snapping up users and grabbing market share in the ad market. Zuckerberg said on the conference call that Facebook’s Instagram Reels offering, which competes with TikTok, has hit $1 billion in annual sales. However, despite Facebook’s investment in Reels, the product doesn’t generate revenue as efficiently as Instagram Stories and the main news feed.

“The faster Reels grows, the more revenue will be squeezed out by products with higher monetization in the short term,” Zuckerberg said.

The conference call was the last for Sheryl Sandberg, Meta’s chief operating officer, who announced in June that she is leaving the company after 14 years. Given the state of the business, she didn’t have much good news to share.

Facebook COO Sheryl Sandberg speaks onstage during “Putting a Best Facebook Forward” at Vanity Fair’s 6th Annual New Establishment Summit.

Matt Winkelmeyer | Getty Images

“These continue to be turbulent times for the global economy,” Sandberg said. “Many of the macro factors affecting our revenue are continuations of things we’ve seen in previous quarters, such as B. the ongoing effects of the war in Ukraine and the normalization of e-commerce after the peak of the pandemic. But there are also new challenges with rising inflation and uncertainty about a looming recession.

Meta said headcount grew 32% year over year to 83,553. However, the company said earlier in the period that it plans to slow the pace of hiring, reflecting sentiment from many of its tech peers. Total spending in 2022 is also expected to be between $85 billion and $88 billion, compared to previous estimates of $87 billion to $92 billion.

A significant amount will go to Meta’s Reality Labs unit, which is responsible for the development of the Metaverse and related virtual reality and augmented reality technologies. The division posted revenue of $452 million but posted a loss of $2.8 billion in the second quarter, and Meta says it expects to generate less revenue in the third quarter than in the second.

Earlier this week, Meta increased the price of its Quest 2 VR headset by $100, citing rising production and shipping costs. Although Meta is currently the leader in VR headset sales, the market is still tiny compared to mobile advertising.

As the company continues to focus on Metaverse as part of its corporate rebrand, it’s also spending more on sales and marketing. Those costs rose 10% year over year in the second quarter to $3.6 billion.

As Facebook struggles to meet Wall Street demands, chief financial officer David Wehner is taking on a new role as chief strategy officer and overseeing corporate development, the company said. Meta promotes Susan Li, the company’s current vice president of finance, to CFO.

CLOCK: Meta could become dead money until Metaverse pays off

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