Facebook shares plunge more than 20% on weak earnings, big forecast miss

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Facebook shares tumbled more than 20% in extended trading on Wednesday after the company reported disappointing earnings, gave weak guidance and said user growth has stagnated.

Here are the results:

  • Earnings per share: $3.67 vs $3.84 expected, according to a Refinitiv survey of analysts
  • Revenue: $33.67 billion vs $33.4 billion expected, according to Refinitiv

Facebook also missed estimates with user numbers.

  • Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected by analysts, according to StreetAccount
  • Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected by analysts, according to StreetAccount
  • Average Revenue per User (ARPU): $11.57 vs $11.38 expected by analysts, according to Street Account

The company, which was recently renamed Meta, issued disappointing guidance for the first quarter in addition to coming up short on its fourth-quarter profit and user numbers. Daily Active Users (DAUs) on Facebook were slightly down in the fourth quarter compared to the previous quarter, marking its first quarterly decline in DAUs on record.

Facebook said revenue in the first quarter will be $27 billion to $29 billion, while analysts were expecting sales of $30.15 billion, according to Refinitiv. That would mean 3% to 11% year-over-year growth.

Facebook said it’s being hit by a combination of factors, including privacy changes to Apple’s iOS and macroeconomic challenges. It blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets.

There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos.

“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” Facebook said.

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The report is Facebook’s first since changing the name of its parent company to Meta, which is a nod to the metaverse. CEO Mark Zuckerberg announced the name change in October following a series of troubling reports about Facebook that stemmed from leaked documents shared by a former employee with journalists, lawmakers and the Securities and Exchange Commission.

With the name change to Meta comes a new reporting structure. The company said in its last earnings report that it will break out its hardware division, Facebook Reality Labs, into a separate division. Its core business will be Facebook’s Family of Apps (FoA), including Instagram, Messenger and WhatsApp.

Meta said its Family of Apps saw revenue of $32.79 billion with operating income of $15.89 billion in the fourth quarter. Its Reality Labs segment made $877 million in revenue in the quarter with an operating loss of $3.3 billion.

For the fourth quarter, Facebook is proving to be an outlier among the top tech companies. Its results come a day after Alphabet cruised past estimates, sending its stock higher on Wednesday. Apple and Microsoft also topped estimates on profit and revenue. Despite a January stock slump across tech, the industry giants, other than Netflix, have delivered uplifting earnings reports, reminding investors of the power of their dominant businesses even in a challenging macro environment.

As of Wednesday’s close, Facebook’s shares are down about 4% this year.

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