(Headline USA) Facebook and Instagram’s parent company Meta posted its first revenue decline in history Thursday, dragged by a drop in ad spending as the economy falters — and as competition from rival TikTok intensifies.
The company’s stock dropped slightly in after-hours trading following the results, suggesting Wall Street was largely expecting the weak earnings report. The tech titan has come under heavy fire recently for its ultra-woke and far-leftist policies and its apparent mission to cancel conservative thought.
The results also largely followed a broader decline in the digital advertising market that is dinging rivals such as Alphabet and Snap. Google’s parent company reported its slowest quarterly growth in two years on Tuesday.
Meta also faces some unique challenges, including the looming departure of its chief operating officer Sheryl Sandberg, the chief architect of the company’s massive advertising business.
In addition to TikTok, the decline in ad spending among the downturn and Apple’s privacy changes, “questions about Meta’s leadership” — including Sandberg’s exit and negative sentiment about the company as a whole — also contributed to the decline, said Raj Shah, a managing partner at digital consultancy Publicis Sapient.
Meta earned profits of $6.69 billion, or $2.46 per share, in the April-June period. That’s down 36% from $10.39 billion, or $3.61 per share, in the same period a year ago.
Revenue was $28.82 billion, down 1% from $29.08 billion a year earlier.
Analysts, on average, were expecting earnings of $2.54 per share on revenue of $28.91 billion, according to a poll by FactSet.
“The year-over-year drop in quarterly revenue signifies just how quickly Meta’s business has deteriorated,” said Insider Intelligence analyst Debra Aho Williamson in an email. “Prior to these results, we had forecasted that Meta’s worldwide ad revenue would increase 12.4% this year, to nearly $130 billion. Now, it’s unlikely to reach that figure.”
She added that the good news — if it could be called that — is that Meta’s competitors are also experiencing slowdowns.
Meta is in the midst of a corporate transformation that will take years to complete. It wants to evolve from social media to the “metaverse” — a risky bet that’s still in its nascent stage. The metaverse is sort of the internet brought to life, or at least rendered in 3D.
CEO Mark Zuckerberg has described it as a “virtual environment” in which you can immerse yourself instead of just staring at a screen. The company is investing billions on its metaverse plans that will likely take years to pay off — and as part of its plan renamed itself Meta last fall.
“Expect Meta’s decline to continue until Meta can monetize the metaverse, and begin another Meta-reverse,” Shah said.
Meta’s forecast revenue of $26 billion to $28.5 billion for the current quarter, which is below Wall Street’s expectations.
“This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty,” finance chief David Wehner said in a statement. Meta said Wehner is being promoted to chief strategy officer, where he will oversee the company’s strategy and corporate development. Susan Li, currently vice president of finance, will replace him as CFO.
Shares of Meta Platforms Inc. fell 58 cents to $169 in after-hours trading.
Adapted from reporting by the Associated Press