Facebook parent Meta Platforms posted earnings Wednesday, which fell short of expectations. The stock plummeted in after-hours trades as the social media company with metaverse ambitions scrambles for cost savings amid advertising headwinds caused by concern about the global economy.
Here are some key facts
Meta posted net income of $4.4 Billion, $1.64 per share. This was a 49% drop year-over-year and falls short of the expectations of $1.89 per share. Revenue of $27.7B fared slightly better that what analysts had predicted at $27.4billion, however, it is down 4% from a year ago.
The company also said its revenue this quarter would fall between $30 billion and $32.5 billion—toward the lower end of average analyst expectations.
Meta shares sank 11% to $115 immediately after the report, pushing losses to more than 61% this year alone—far worse than the tech-heavy Nasdaq’s 30% decline.
Justin Post, a Bank of America analyst, downgraded Meta shares to a neutral rating in a preearnings note. He stated that the bank’s investments in the virtual world of the metaverse, also known as immersive virtual reality, “will continue.” [an]Stock overhang, estimated to cost $10.7 Billion next year, despite economic uncertainties potentially increasing.
It comes just a month after Meta declared plans to reduce costs and institute a hiring ban as advertising revenue growth slows amid growing economic pressures.
In the earnings release, Meta CFO David Wehner said the company has “increased scrutiny on all areas of operating expenses” but it also said its employee headcount would remain roughly flat next year from current levels.
$47.2 billion. This is how much Mark Zuckerberg (38), Meta founder, was worth on Wednesday. Zuckerberg, who was worth $130billion at one time, has seen his fortune plunge by over 60% since September 2021 when Meta stock reached its peak.
The Key Background
As central banks, including the Federal Reserve, work to curb inflation and temper consumer demand by raising interest rates, global economies are beginning to slow. The pressures have been evident in recent earnings reports. Alphabet stock fell on Tuesday as the Google parent failed to meet its profit and third-quarter sales expectations. YouTube Advertising posted $7.1 Billion in revenue, significantly below the $7.5 Billion average. Vital Knowledge analyst Adam Crisafulli noted that YouTube and other social media ads are typically less resilient than other forms of advertising during downturns.
The Crucial Quote
“I had hoped the economy would have more clearly stabilized by now,” Zuckerberg reportedly told employees at a meeting outlining the company’s cost-cutting plan last month. But it does not seem that it has yet, so we are trying to be conservative.
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