Shares of Meta plummeted on Wednesday after the company announced mixed results in its third-quarter earnings report, alongside billion-dollar losses in the division devoted to its ambitious “metaverse” project. The Facebook parent company beat analyst predictions for revenue but offered a weak forecast for the upcoming quarter. It posted $27.
7bn in revenue for the third quarter, higher than the $27. 4bn predicted but 4% less than the same period last year. Its earnings a share, which accounts for expenses, was $1.
64 – lower than the $1. 89 predicted. Wednesday’s earnings report marks the latest in a series of difficult earnings reports for Meta, which has invested heavily in new products that it has struggled to monetize over the last year.
In February the company lost $230bn in market value in what was the biggest one-day loss in US history, its stock falling 26%. On Wednesday, the company’s stocks fell 18% in after hours trading as investor concerns grow over the company’s resource burn on new products. Fears of layoffs as Facebook parent Meta reportedly announces hiring freeze Read more Meta costs and expenses were up 19% year over year in the third quarter.
It has poured large amounts of money into the metaverse, its virtual reality project, and thus far seen little return. Reality Labs, its metaverse segment, saw $3. 7bn in losses this quarter and the company said it anticipates that those losses “will grow significantly year-over-year” in 2023.
Struggling to compete with the growing power of TikTok , Meta also invested heavily in its short form video content product Reels, but has struggled with monetization. The losses reported on Wednesday show that Meta has focused perhaps too intently on its new ventures, said Debra Aho Williamson, a principal analyst with Insider Intelligence. “Meta is on shaky legs when it comes to the current state of its business,” she said.
“To return to stronger growth, Meta needs to turn its business around. It would benefit from less priority on the metaverse and more on fixing its core business. ” Investors on Wednesday’s earnings call expressed concern about the losses, asking chief executive Mark Zuckerberg about the reasoning behind these “experimental bets”.
Zuckerberg defended his choices to focus on the metaverse and other new products, stating he is confident they will pay off. “Over time, these are going to end up being very important investments for the future of our business,” he said. “This is some of the most historic work we’re doing.
People are going to look back on [this] decades from now and talk about the importance of the work that was done here. ” Despite the setbacks Zuckerberg said he was “pleased” with “strong engagement” fueled by Reels this quarter and said the trends look “better from what I see than some of the commentary I’ve seen suggests”. “While we face near term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” he said.
The losses at Meta come as the tech industry and the market at large struggles with economic headwinds, including rising inflation and fears of a recession – with Google parent Alphabet and Microsoft both announcing disappointing third-quarter results this week Sign up to Business Today Free daily newsletter Get set for the working day – we’ll point you to the all the business news and analysis you need every morning Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy . We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply.
In addition to these broader factors, Meta has also struggled with changes to Apple privacy policies enacted in 2021 that undercut its primary advertising model – which the company predicted would cause it to lose out on a projected $10bn in advertising revenue in 2022. Meta announced in September a staff hiring freeze and potential restructuring, leaving many to brace for layoffs. This comes after its July earnings report, when it projected its first revenue drop since going public in 2012.
In a statement accompanying the report, Meta said it would be “holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities”. “As a result, we expect headcount at the end of 2023 will be approximately in-line with third quarter 2022 levels,” the company said. .
From: theguardian
URL: https://www.theguardian.com/technology/2022/oct/26/meta-earnings-report-facebook-stocks
