Net income during the quarter declined 36% year-over-year to nearly $6.7 billion. This comes at a time when Meta is looking to transition to a metaverse-based business focused on AR/VR experiences.
Facebook parent Meta has issued its Q2 financial results showing a steeper-than-expected drop in revenue, a miss on earnings, and a surprisingly weak forecast. After reporting a second consecutive decline in year-over-year sales, the social media giant’s share price is currently down 4.65% in extended trading.
Looking ahead Meta warned investors that ad sales were likely to fall again in the months ahead, citing decreased eCommerce spending and worries about inflation causing consumers to spend more cautiously.
“These continue to be turbulent times for the global economy,” said CCO Sheryl Sandberg, who announced in June that she’s leaving the company after 14 years.
“Many of the macro factors having an impact on our revenue are continuations of things we have seen in previous quarters, such as a continued impact of the war in Ukraine and the normalization of e-commerce after the pandemic peak. But there are also new challenges with rising inflation and uncertainty around a looming recession.”
While Meta’s headcount increased 32% from a year earlier to 83,553, looking ahead, Mark Zuckerberg said the company would “steadily” reduce its hiring over the next year, citing the downturn and its plans to shift investment into new areas, including its virtual reality platform, Horizon, with hopes that the metaverse will be a future driver of growth.
“This is a period that demands more intensity and I expect us to get more done with fewer resources,” Zuckerberg said.
Reels still struggling
In an effort to fend off the threat of TikTok, Meta has focused more on its Reels product, a TikTok-style short video feature.
Though Reels has reached $1 billion in annualized revenue, it hasn’t generated revenue as well as Instagram Stories and the main news feed. While users are spending more time watching Reels, Meta doesn’t take in as much money from ads in those videos as it does from other formats.
“In the near term, the faster that Reels grows, the more revenue that actually displaces from higher monetizing” products, Zuckerberg said.
- Revenue: $28.8 billion versus $28.9 billion expected
- Earnings per share: $2.46 versus $2.54 expected
- Facebook daily active users: 1.97 billion versus 1.95 billion expected