Meta shares fall 17% as quarterly profit halves

New York
CNN Business
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Meta on Wednesday posted the second quarterly decline in revenue since its IPO and warned it was making « significant changes » aimed at cutting costs ahead of 2023 as it faces an economic downturn hitting its business. principal of online advertising.

For the three months ended September, Meta (FB) posted revenue of $27.7 billion, down 4% year-over-year and slightly above Wall Street analysts’ expectations . Facebook’s parent company posted its first-ever quarterly revenue decline in the June quarter.

The company reported net income of nearly $4.4 billion, less than half the amount it made in the same period a year earlier and below analysts’ forecasts.

« We approach 2023 with a focus on prioritization and efficiency that will help us navigate today’s environment and emerge an even stronger business, » Meta Founder and CEO Mark Zuckerberg said in a statement. a statement.

Shares of Meta fell nearly 17% in after-hours trading on Wednesday after the results.

Demand for online advertising has fallen in recent months amid rising inflation and fears of an impending recession. Tech companies like Google and Snap have also seen their ad revenue hit. Meta’s chief financial officer, David Wehner, said in a call with analysts following the report that the average price per ad across Meta’s platforms fell 18% in the quarter.

At the same time, Meta user growth is slowing amid increased competition from competitors like TikTok. Meta said it had 2.96 billion monthly active users on its main app Facebook at the end of the quarter, up 2% year-over-year. This is down from the 6% growth rate recorded in the prior year quarter. Daily active users on Meta’s family of apps grew 4% to 2.93 billion, down from the 11% increase in the prior year.

Zuckerberg noted on the call that Instagram now has more than 2 billion monthly active users and WhatsApp has more than 2 billion daily active users.

These challenges to its core business come as Meta funnels billions of dollars into an ambitious new bet to build a future version of the internet called the Metaverse that will likely stick around for years to come.

Wehner said operating losses from the company’s metaverse ambitions, which are classified in its Reality Labs unit, are expected to « increase significantly year-over-year » in 2023. Reality Labs lost nearly $3.7 billion in the September quarter and cost the company a total of $9.4 billion so far this year. Revenue for the Reality Labs unit also fell nearly 50% year over year in the September quarter.

Altimeter Capital, a shareholder of Meta, wrote an open letter last week calling on the company to cut its headcount spending by at least 20% and annual capital spending by at least $5 billion, and to limit its investments in the metaverse to no more than $5 billion per year.

In Wednesday’s report, Wehner said the company is « making significant changes across the board to operate more efficiently. » Executives said the company expects headcount at the end of 2023 to be roughly in line with or slightly lower than the 87,314 it reported at the end of September (a 28% increase from the previous year). ‘last year).

“We are maintaining some teams in terms of headcount, reducing others and only investing in headcount growth in our highest priorities,” Wehner said. He also hinted that the company could reduce the physical footprint of its offices.

Zuckerberg said on the call that the three main areas of investment for the company over the coming year are its AI discovery engine that powers Reels and other recommendations, ads and messaging. commercial, and its future vision of the metaverse. Meta earlier this month unveiled its new virtual reality headset, the Meta Quest Pro, and touted its potential for business customers.

In the last three months of the year, Meta expects quarterly revenue of between $30 billion and $32.5 billion. At the high end, the projection would mark a decline of 3.5% year-on-year compared to the same period of the previous year.