Meta Stock Plunges on Missed Expectations and Light Guidance

Meta’s revenue declined for a second consecutive quarter, hurt by falling ad sales, challenges from Apple’s iOS privacy update and increased competition from TikTok.
Image: Dima Solomin

After falling short of earnings expectations and issuing a weak forecast for the fourth quarter, Meta shares plunged 19% in extended trading.  If the sell-off continues into Thursday’s regular trading day, the stock will be at its lowest since 2016.

Meta’s earnings reflect the continuing slowdown in digital advertising slamming social media companies like Meta whose shares are off as much as 60% this year as brands rein in ad spending amid rising inflation and interest rates.

Looking ahead Meta said that revenue for the fourth quarter will be $30 billion to $32.5 billion – possibly falling short of analysts’ expectations of sales of $32.2 billion.


 

“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” said Meta CEO Mark Zuckerberg.

“We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”

Revenue in the Reality Labs unit, which produces the company’s virtual reality headsets and its metaverse business, dropped by almost half from a year earlier to $285 million. The loss grew to $3.67 billion from $2.63 billion in the same quarter last year. and has lost $9.4 billion so far this year.

“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Meta said.


 

“Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”

Third Quarter 2022 Operational and Other Financial Highlights
  • Family daily active people (DAP) – DAP was 2.93 billion on average for September 2022, an increase of 4% year-over-year.
  • Family monthly active people (MAP) – MAP was 3.71 billion as of September 30, 2022, an increase of 4% year-over-year.
  • Facebook daily active users (DAUs) – DAUs were 1.98 billion on average for September 2022, an increase of 3% year-over-year.
  • Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of September 30, 2022, an increase of 2% year-over-year.
  • Ad impressions and price per ad – In the third quarter of 2022, ad impressions delivered across our Family of Apps increased by 17% year-over-year and the average price per ad decreased by 18% year-over-year.
  • Revenue – Revenue was $27.71 billion, a decrease of 4% year-over-year, and an increase of 2% year-over-year on a constant currency basis. Had foreign exchange rates remained constant with the third quarter of 2021, revenue would have been $1.79 billion higher.
  • Costs and expenses – Total costs and expenses were $22.05 billion, an increase of 19% year-over-year. This includes an impairment loss of $413 million for certain operating leases as part of our ongoing work to align our office facilities footprint with our anticipated operating needs.
  • Capital expenditures – Capital expenditures, including principal payments on finance leases, were $9.52 billion for the third quarter of 2022.
  • Share repurchases – We repurchased $6.55 billion of our Class A common stock in the third quarter of 2022. As of September 30, 2022, we had $17.78 billion available and authorized for repurchases.
  • Cash, cash equivalents, and marketable securities – Cash, cash equivalents, and marketable securities were $41.78 billion as of September 30, 2022.
  • Long-term debt – Long-term debt was $9.92 billion as of September 30, 2022.
  • Headcount – Headcount was 87,314 as of September 30, 2022, an increase of 28% year-over-year.

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