-
Meta (META, $97.94) shares continued their 2022 freefall, plunging 19% in extended trading on Wednesday after Facebook’s parent issued a weak forecast for the fourth quarter and came up well short of Wall Street’s expectations for earnings. Meta’s revenue declined 4% year over year to hit $27.7 billion.
-
Meta Q4 revenue guidance came in between $30 billion and $32.5 billion while the Street was expecting $32.2 billion. While its earnings per share came in at $1.64 vs. the $1.89 expected. In addition, Meta’s operating margin, or the profits left after accounting for costs to run the business, sank to 20% from 36% a year earlier. Overall net income was down 52% to $4.4 billion in the third quarter.
-
The decline in income is mostly due to Meta’s huge investment in the metaverse. Reality Labs, Meta’s virtual reality division, lost $3.672 billion this quarter. The same thing happened in Q1 when CEO Mark Zuckerberg justified a $3 billion loss by saying that the 2030s will be “exciting.”
Why it matters
Meta is contending with a broad slowdown in online ad spending, challenges from Apple’s iOS privacy update, and increased competition from TikTok. Add it up, and Meta has posted consecutive quarters of revenue declines and is expected to post its third straight drop in the fourth quarter. A digital advertising slowdown is hitting social media companies like Meta especially hard. Fellow tech giants Alphabet (GOOGL, $92.22) reported a substantial miss on YouTube ad revenues. While Snap (SNAP, $9.56) also issued a rough Q3 earnings report saying that revenue growth continues to decline.
