Facebook shares tumbled more than 20% in extended trading on Wednesday after the company reported disappointing earnings and gave a weaker-than-expected forecast.
Here are the results:
- Earnings per share: $3.67 vs $3.84 expected, according to a Refinitiv survey of analysts
- Revenue: $33.67 billion vs $33.4 billion expected, according to Refinitiv
Facebook also missed estimates with user numbers.
- Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected by analysts, according to StreetAccount
- Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected by analysts, according to StreetAccount
The company, which was recently renamed to Meta, issued disappointing guidance for the first quarter in addition to coming up short on its fourth-quarter profit and user numbers. Facebook said revenue in the first quarter will be $27 billion to $29 billion, while analysts were expecting sales of $30.15 billion, according to Refinitiv.
Facebook said it’s being hit by a combination of factors privacy changes to Apple’s iOS and macroeconomic challenges. It blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets.
There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos.
“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” Facebook said.
The report is Facebook’s first since changing the name of its parent company to Meta, which is a nod to the metaverse. CEO Mark Zuckerberg announced the name change in October following a series of troubling reports about Facebook that stemmed from leaked documents shared by a former employee with journalists, lawmakers and the Securities and Exchange Commission.
With the name change to Meta comes a new reporting structure. The company said in its last earnings report that it will break out its hardware division, Facebook Reality Labs, into a separate division. Its core business will be Facebook’s Family of Apps (FoA), including Instagram, Messenger and WhatsApp.
Meta said its Family of Apps saw revenue of $32.79 billion with operating income of $15.89 billion in the fourth quarter. Its Reality Labs segment made $877 million in revenue in the quarter with an operating loss of $3.3 billion.
For the fourth quarter, Facebook is proving to be an outlier among the top tech companies. Its results come a day after Alphabet cruised past estimates, sending its stock higher on Wednesday. Apple and Microsoft also topped estimates on profit and revenue. Despite a January stock slump across tech, the industry giants, other than Netflix, have delivered uplifting earnings reports, reminding investors of the power of their dominant businesses even in a challenging macro environment.
The company said it will provide historical segment results for full year 2019 through 2021, as well as quarterly results starting from the fourth quarter of 2020. The new structure will give investors a glimpse into the performance of Meta’s newest business, which Zuckerberg sees as the future of the company.
Meta will continue to report total advertising revenue and advertising revenue by user geography under the FoA group. Ads remain the way Meta will be generating the bulk of its money for the foreseeable future. Analysts are expecting total revenue growth of about 19% in the fourth quarter and a similar rate of expansion for all of 2022.
As of Wednesday’s close, the company’s shares are down about 4% this year.
This story is developing. Check back for updates.