Meta Platforms Inc. is the latest technology giant to feel a financial squeeze, as Facebook’s parent company reported its lowest sales growth in a decade on Wednesday and issued lukewarm revenue guidance.
The “revenue headwind” is likely to lead to a decline in investment, Meta chief Mark Zuckerberg said in a webcast presentation with analysts late Wednesday.
Still, Metas stocks FB,
jumped more than 18% in after-trading on Wednesday, after the company formerly known as Facebook revealed earnings of $ 7.47 billion in the first quarter, or $ 2.72 per share, down from $ 9.5 billion, or 3, $ 30 per share last year, after sales of $ 27.9 billion, up 7% from $ 26.2 billion a year ago.
Earnings beat the average profit forecast of $ 2.56 per share, but sales fell below the consensus of $ 28.3 billion, according to analysts asked by FactSet.
Meta posted a second-quarter revenue forecast of $ 28 to $ 30 billion, while analysts forecast $ 30.7 billion. Facebook executives have cited inflation, supply chain problems, the war in Ukraine, European economic headwinds, increased competition from services such as TikTok and changes in Apple Inc. AAPL,
made into the mobile operating system that makes it harder for apps to track consumers in ads.
For more: Meta CFO cries “wolf” again with gloomy Facebook prospects – but he may be right this time
In a white paper published by Apple on Tuesday, Kinshuk Jerath, a professor of business in the marketing department at Columbia Business School, concluded that it would be speculative to demand billions of advertising dollars moved from companies like Meta to Apple because of Apple’s move.
“This outlook reflects a continuation of the trends affecting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine,” Meta Chief Financial Officer David Wehner said in a statement announcing the results. “Our guidance assumes that foreign exchange will be about 3% headwind to year-over-year growth in the second quarter, based on current exchange rates.”
In the webcast presentation, Zuckerberg acknowledged the impact of TikTok and Apple, but said that Meta was confident that Reel’s short-form videos and artificial intelligence would appeal to each company. He added that the company’s push into metaverse will also increase revenue, especially in advertising.
It mixed the results come on the heels of less sales and revenue than expected from Google parent Alphabet Inc GOOGL,
Tuesday raises concerns that advertising-dependent companies may face a difficult situation with a war raging in Ukraine and inflation burning through consumers’ wallets. Snap Inc. SNAP,
warned of a “challenging operating environment” when it reported results last week, although Pinterest Inc. PINS,
the shares also rose after earnings on Wednesday.
Daily active users, or DAUs, a crucial estimate for Meta’s global growth, increased by 4% to 1.96 billion, topping analysts’ expectations of 1.95 billion. The rise greatly dampened investors, who have openly worried about reduced user engagement on Facebook’s platforms.
«The growth in (DAUs) is a good sign for Facebook, especially after the 4th quarter of 2021 when it experienced its first decline in DAUs. But it is also clear that Facebook is still struggling to bring in new users, and it is becoming increasingly difficult for Instagram to take up slack, says Evelyn Mitchell, analyst at Insider Intelligence. ‘Most of the growth in both [monthly active users] and DAUs in the first quarter came from the rest of the world, not the United States and Canada, which are making money at a better rate. “
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Meta’s stock has been among the worst in technology this year, and has fallen 48% so far, while the broader S&P 500 index SPX,
has fallen 12% in 2022.