Earnings beat forecast but sales fall short of consensus; beleaguered shares still jump nearly 20%
Meta Platforms Inc. is the latest tech giant to feel an economic pinch, as Facebook’s parent company reported its slowest sales growth in a decade Wednesday and issued lukewarm revenue guidance.
“The revenue headwinds” will likely lead to a slowdown in investments, Meta Chief Executive Mark Zuckerberg said in a webcast presentation with analysts late Wednesday.
Nonetheless, Meta’s stock FB, 14.14% jumped more than 18% in after-hours trading Wednesday, after the company formerly known as Facebook disclosed first-quarter earnings of $7.47 billion, or $2.72 a share, down from $9.5 billion, or $3.30 a share last year, on sales of $27.9 billion, up 7% from $26.2 billion a year ago.
Earnings beat the average forecast for profit of $2.56 a share, but sales fell short of the consensus of $28.3 billion, according to analysts polled by FactSet.
Meta issued a second-quarter revenue forecast of $28 billion to $30 billion, while analysts were forecasting $30.7 billion. Facebook executives have cited inflation, supply-chain issues, the war in Ukraine, European economic headwinds, increased competition from services such as TikTok and changes Apple Inc. AAPL, 3.10% made to its mobile operating system that make it more difficult for apps to track consumers in ads.
In a white paper published by Apple on Tuesday, Kinshuk Jerath, a professor of business in the marketing division at Columbia Business School, concluded it would be speculative to claim billions of advertising dollars moved from companies like Meta to Apple because of Apple’s move.
“This outlook reflects a continuation of the trends impacting 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 foreign currency will be approximately a 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 Meta was confident in its Reels short-form videos and artificial intelligence to address each company, respectively. He added that the company’s push into metaverse will also boost revenue, especially in advertising.
The mixed results arrive on the heels of lighter-than-expected sales and earnings from Google parent Alphabet Inc GOOGL, 1.74% GOOG, 2.03% on Tuesday, deepening concerns that companies dependent on advertising may face a rough patch with a war raging in Ukraine and inflation burning through the pocketbooks of consumers. Snap Inc. SNAP, 0.02% warned of a “challenging operating environment” when it reported results last week, though Pinterest Inc. PINS, 3.54% shares also soared after earnings on Wednesday.
Daily active users, or DAUs, a crucial metric for Meta’s growth globally, increased 4% to 1.96 billion, topping analyst expectations of 1.95 billion. The uptick largely allayed investors, who have openly fret over decreased user engagement on Facebook’s platforms.
“The growth in (DAUs) is a good sign for Facebook, especially coming off of Q4 2021 when it experienced its first-ever decline in DAUs. But it’s also clear that Facebook is still struggling to bring in new users, and it’s becoming increasingly difficult for Instagram to pick up the slack,” said Evelyn Mitchell, an analyst at Insider Intelligence. “Most of the growth in both [monthly active users] and DAUs in Q1 came from the rest of the world, not the US and Canada, which monetizes at a better rate.”
Meta’s stock has been among the worst in tech this year, plummeting 48% so far, while the broader S&P 500 index SPX, 0.86% has dipped 12% in 2022.