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Latest: Meta reports earnings, revenue miss and forecasts second straight quarter of declining sales

Latest: Meta reports earnings, revenue miss and forecasts second straight quarter of declining sales
  • On the top and bottom lines, Meta failed to meet expectations and issued a bleak outlook for the third quarter.
  • As advertisers cut down on ad spending, the company’s shares have lost half their value this year.
  • The dismal advertising demand environment is expected to continue, according to the company’s guidance.

Shares of Facebook’s parent company Meta plunged more than expected in the first quarter of the year, missed on earnings, and offered a very weak projection for the second quarter of the year. Extended trading saw the stock fall 3.8 percent.

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In this regard, here’s how the company performed:

According to Refinitiv, the company earned $2.46 per share instead of the predicted $2.59 per share.
Compared to Refinitiv’s forecast of $28.94 billion in revenue, Refinitiv reported $28.82 billion in revenue, while StreetAccount reported 1.97 billion daily active users (DAUs).
StreetAccount predicts 2.93 billion MAUs, but expects 2.94 billion. The average revenue per user (ARPU) is $9.82, whereas StreetAccount expects $9.83.
An investor concern over the health of Meta’s primary online advertising business is evidenced by an almost 50% drop in the value of Meta’s stock since the beginning of the year. Some organizations have slashed their ad budgets as a result of a sluggish economy, which has limited Meta’s capacity to track consumers on iOS.

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In comparison to the same period a year earlier, revenue decreased by roughly 1% in the second quarter. “Continuation of the negative advertising demand environment we experienced throughout the second quarter, which we feel is being influenced by broader macroeconomic uncertainties,” was Meta’s other gloomy third-quarter estimate.

In a conference call with analysts, Meta CEO Mark Zuckerberg announced that the company will reduce staff over the coming year as it prepares for the slowdown in the economy.

This is an era of increased intensity and I want us to accomplish more with fewer resources, Zuckerberg remarked.

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A revenue of $26 to $28.5 billion is expected in the third quarter, lagging behind Refinitiv’s average analyst revenue estimate of $30.5 billion dollars. That corresponds into an anticipated drop of between 2% and 11% from last year.

Facebook’s dismal numbers continue a trend that rivals Snap and Twitter started last week. Executives blamed the economic and mobile platform issues that have infiltrated the internet ad business for both companies’ poor second-quarter results. Stocks of Alphabet and Microsoft climbed on Wednesday despite the fact that both firms missed earnings projections on the top and bottom lines, a sign of the gloomy sentiment that had settled in by this week.

Reels is having a hard time monetizing.
TikTok, a short-form video app, is gaining users and advertising market share, which is posing a new competition to Meta. According to Zuckerberg, Facebook’s Instagram Reels service, which competes with TikTok, has hit $1 billion in yearly revenue. Although Facebook has invested much in Reels, the product does not produce as much income compared to Instagram Stories and the main news stream.

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According to Zuckerberg, “in the near term, the quicker that Reels increases, the more income that really displaces from higher monetizing” products.

Sheryl Sandberg, Meta’s chief operational officer, revealed in June that she was stepping down after 14 years at the firm. She didn’t have a lot of good news to report because of the current status of the company.

“The global economy is still in a state of flux,” Sandberg remarked. Macro issues that have an influence on our business, such as the turmoil in Ukraine and the stabilization of e-commerce following a pandemic peak, continue to have an impact.” Inflation is growing, and there is worry about an approaching recession.

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Meta’s workforce grew by 32 percent from last year to 83,553 employees. But earlier this year, the company stated that it will restrict its hiring pace, echoing the stance of many of its technology counterparts. Additionally, it expects overall costs to be between $85 and $88, down from recent predictions of $87 to $92 billion, in 2022..

Meta’s Reality Labs arm, which is in charge of developing the metaverse and related virtual reality and augmented reality technologies, is receiving a significant amount of funding. As a result of a $2.8 billion loss in Q2 and Meta’s prediction that revenue would be lower in Q3 than Q2, this division made revenues of $452 million during Q2.

Costs for production and delivery have increased by $100 for the Meta’s Quest 2 virtual reality headset. Despite Meta’s dominance in the VR headset market, it is still a minuscule portion of overall mobile advertising spending.

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Sales and marketing are becoming increasingly important as the corporation shifts its focus to the metaverse as part of its corporate rebranding efforts. In the second quarter, such costs rose by 10% year-over-year to $3.6 billion.

Chief Financial Officer David Wehner is taking on a new role as chief strategy officer, in charge of corporate development, as Facebook struggles to meet Wall Street’s expectations. Susan Li, Meta’s current vice president of finance, has been promoted to the position of CFO.

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