Social media beast Meta, owner of Facebook reported worse than expected second quarter earnings after the close Wednesday. $FB guiding lower, and revenue and EPS missed as it posted a net profit of $6.7 billion for the second quarter, the third quarter in a row Meta’s bottom line has fallen. The company hasn’t experienced such a slump since the fourth quarter of 2012. Q2 daily active user base rose to 1.97 billion users. Up from 1.96 billion three months ago.
Meta Platforms Q2 22 Earnings:
Meta reported quarterly revenue of $28.8 billion, down almost 1% from a year earlier and slightly below the $28.9 billion Wall Street estimates. It was the first time that the company has posted a quarterly drop in revenue from the year earlier.
Highlights
- EPS: $2.46 (est $2.54)
- Revenue: $28.82Bln (est $28.935Bln)
- Q2 Ad Rev. $28.15b, Est. $28.53b
- Q2 daily active user base rose to 1.97 billion users. Up from 1.96 billion three months ago. The increase defied expectations of analysts surveyed by FactSet who thought user numbers would fall.
- Q2 Facebook Monthly Active Users 2.93b, Est. 2.95b
- Sees Q3 Rev. $26b To $28.5b, Est. $30.32b
- Guidance Assumes Forex Will Be About 6% Headwind
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Chief Executive Mark Zuckerberg said Wednesday. “It’s always hard to predict how deep or how long these cycles will be, but I’d say that the situation seems worse than it did a quarter ago,” he said on an earnings call.
Digital Advertising
Meta’s average price per ad fell 14% in the quarter. A year ago, the company reported an increase of 47%, year over year, for its average price per ad.
Digital advertising market is hurting from surging inflation and other factors that are causing a slowdown in ad spending. Google parent Alphabet Inc. on Tuesday reported the slowest rate of growth since the second quarter of 2020, when the pandemic crimped demand for advertising in some areas. Rival Snap reported its weakest-ever quarterly sales growth last week while Twitter reported a decline in revenue also.
Metaverse
Facebook last year announced new efforts to invest in areas outside of its core advertising business, including augmented and virtual reality.
- Facebook breaks out its VR/AR unit called Facebook Reality Labs (FRL) separately. The company said that investments in Facebook Reality Labs will reduce its overall operating profit by roughly $10 billion in 2021.
- Revenue and operating profit for the company’s family of apps, including Facebook, Instagram, Messenger, WhatsApp and other services, will be reported separately from FRL, which includes AR and VR-reality related hardware, software and content.
- Investments outside of advertising are proving critical to Facebook’s long-term growth.
Apple Concerns
Facebook said it continued to face challenges in targeting ads as a result of changes made by Apple Inc. to the iPhone’s operating system. Chief Operating Officer Sheryl Sandberg, on her last earnings call before she departs Meta after 14 years, said the company is adapting its business to do better ad targeting, with less user data, with products such as click-to-message ads, which open a chat with a business whenever a user clicks on the ad.
A main concern among investors is Apple’s (AAPL) privacy changes would negatively alter FB’s outlook. Since the recently launched iOS 14.5 update allows users to block apps like FB from tracking user activity, creating a major hurdle for companies that rely on targeted ads to drive revenue.
Digital ads could also be impacted by inflation and Apple’s recent privacy changes on iPhone operating systems, which Wehner previously predicted would result in a $10 billion revenue hit in 2022, though he acknowledged that figure was an estimate.
Outlook
Digital ads are already a multibillion-dollar business growing at double digits. “We are hugely optimistic about this area of our business, and I am very convinced it will work,” Chief Operating Officer Sheryl Sandberg said.
Chief Financial Officer David Wehner said the company, like others, is feeling the pinch from the strong dollar, which is weighing on the top line.
Meta’s shares have retreated since the company posted quarterly results in February that showed a sharper-than-expected decline in profit, gloomy revenue outlook and dip in daily users. Meta’s stock closed more than 6% higher and fell more than 4% after hours following the results.
Source: Traderscommunity, Facebook,
From The Traders Community News Desk