The parent company of Facebook and Instagram, Meta, posted its first revenue decline in history on Thursday, dragged down by a drop in ad spending as the economy falters and competition from rival TikTok intensifies.
Shares of the company fell slightly in after-hours trading following the results, suggesting Wall Street largely expected the weak earnings report.
The results also largely followed a broader slump in the digital ad market that is hitting rivals like Alphabet and Snap. Google’s parent company on Tuesday reported its slowest quarterly growth in two years.
Meta also faces some unique challenges, including the impending departure of its chief operating officer, Sheryl Sandberg, the chief architect of the company’s huge advertising business.
In addition to TikTok, the decline in ad spending between the recession and Apple’s privacy changes, “Meta leadership questions,” including Sandberg’s departure, and negative sentiment about the company as a whole, also contributed. to decline, said Raj Shah, manager. partner of the digital consulting firm Publicis Sapient.
Meta posted earnings 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, had expected earnings of $2.54 per share on revenue of $28.91 billion, according to a survey by FactSet.
“The year-over-year drop in quarterly revenue signifies how quickly Meta’s business has deteriorated,” Insider Intelligence analyst Debra Aho Williamson said in an email. “Prior to these results, we had forecast Meta’s worldwide ad revenue to rise 12.4% this year, to nearly $130 billion. Now, it is unlikely to reach that number.”
He added that the good news, if it could be called that, is that Meta’s competitors are experiencing slowdowns as well.
Meta is in the midst of a corporate transformation that will take years to complete. He wants to evolve from social networks to the “metaverse”, a risky bet that is still in its infancy. The metaverse is a kind of internet brought to life, or at least rendered in 3D. CEO Mark Zuckerberg has described it as a “virtual environment” you can immerse yourself in instead of just looking at a screen. The company is pouring billions into its metaverse plans that will likely take years to come to fruition, and as part of its plan, it renamed itself Meta last fall.
“Meta’s decline is expected to continue until Meta is able to monetize the metaverse and start another Meta-reverse,” Shah said.
Meta forecast revenue of $26 billion to $28.5 billion for the current quarter, below Wall Street expectations.
“This outlook reflects the continuation of the weak advertising demand environment we experienced during the second quarter, which we believe is being driven by broader macroeconomic uncertainty,” chief financial officer 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, current vice president of finance, will replace him as chief financial officer.
Shares of Meta Platforms Inc. fell 58 cents to $169 in after-hours trading.