Meta reports earnings miss and forecasts second consecutive quarter of declining revenue
Published Wed, Jul 27 20223:31 PM EDT
Updated Moments Ago
Jonathan Vanian @jonathanvanian
CNBC.com
Key Points
- Meta shares have lost about half their value this year as marketers pull back on ad spending.
- The company's online ad business is getting hit by Apple's iOS privacy update and a tough economy.
- Competitors Snap and Twitter reported disappointing second-quarter earnings, and Alphabet missed estimates in its announcement on Tuesday.
Facebook parent Meta reported a steeper-than-expected drop in revenue, missed on earnings and issued a surprisingly weak forecast pointing to a second consecutive decline in sales. The shares slipped in extended trading.
Here's how the company did:
- 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 (DAUs): 1.97 billion vs 1.96 billion expected, according to StreetAccount
- Monthly Active Users (MAUs): 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 beginning of the year, underscoring investor concern about the health of the company's core online advertising business. That unit has been hurt by Apple's iOS privacy update last year, limiting Meta's ability to track users, and by a weakening economy that's led some companies to slash their ad budgets.
Chief Financial Officer David Wehner is taking on a new role of chief strategy officer, overseeing corporate development, the company said. Meta is promoting Susan Li, the company's current vice president of finance, to be CFO.
Revenue in the second quarter fell almost 1% from a year earlier.
In addition to the second-quarter miss, Meta issued a disappointing third-quarter forecast, citing a "continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty."
The company said sales in the quarter will be in the range of $26 billion to $28.5 billion, trailing the $30.5 billion average analyst estimate, according to Refinitiv.
Based on Meta's forecast, revenue in the third quarter will drop by as little as 2% and by as much as 11%. It continues the trend that competitors Snap and Twitter started last week. Those companies both reported disappointing second-quarter results, and executives cited economic and mobile platform challenges that have permeated the online ad market.
The mood soured so much that shares of Alphabet and Microsoft rose on Wednesday even though both companies missed analysts' estimates on the top and bottom lines.
Meta said that its headcount increased 32% from a year earlier to 83,553. However, the company indicated earlier in the quarter that it plans to slow the pace of hiring, echoing the sentiment from many of its tech peers.
The company also said that its Reality Labs business unit, responsible for developing the metaverse and related virtual reality and augmented reality technologies, brought in $452 million in sales, but recorded a $2.8 billion loss in its second quarter. That business unit is also projected to generate less money 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, that market is still tiny compared to mobile advertising.
Executives will discuss the results with analysts on a webcast starting at 5:00 p.m. ET.
This story is developing.
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