Facebook parent Meta reports 21 per cent drop in profits, second consecutive quarterly decline

First-quarter profit has exceeded Wall Street’s expectations despite slower revenue growth

Vishwam Sankaran
Thursday 28 April 2022 17:10
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What Is The Metaverse

Facebook’s parent company Meta has reported a profit of $7.5bn for the first quarter, down by about 21 per cent from the same quarter a year earlier, marking the company’s first back-to-back profit decline in over a decade.

However, the company’s revenue has grown 7 per cent to $27.91bn from $26.17bn, it noted.

In its last earnings report in February, Meta revealed stagnating user growth that sent its stock plummeting.

But in the new first quarter 2022 results conference call, Facebook said its daily active user count has slightly increased by about 4 per cent compared to last year, and has also jumped past Wall Street‘s expectations, sending Meta’s shares up in after-hours trading.

Analysts have pointed out that privacy changes by Apple have made it harder for companies like Meta to track people for their targeted advertising services, which may have put a dent on the company’s revenue.

Meta has also been pivoting towards new products, spending heavily on items related to its metaverse-like virtual reality (VR) goggles.

Facebook’s valuation soared above $1 trillion for the first time in June last year, but following its rebranding and disappointing earnings results in February, parent company Meta’s value stands close to $500bn.

The company has also informed investors that its revenue can’t continue to grow at the kind of breakneck pace it once grew at, and Meta’s slow revenue growth was likely already expected by investors.

“Prior to the war in Ukraine, we faced expected headwinds related to the continued slowdown in our online commerce vertical which had grown quickly during the Covid-19 pandemic as well as ongoing targeting and measurement challenges impacting advertising spend,” Meta’s chief financial officer Dave Wehner said during the earnings call.

“We experienced a further deceleration in growth following the start of the Ukraine war due to the loss of revenue in Russia as well as a reduction in advertising demand both within Europe and outside the region. We believe the war introduced further volatility into an already uncertain macroeconomic landscape for advertisers,” he added.

Meanwhile, Meta’s core apps, including Instagram, WhatsApp, and Messenger, have also been facing competition from Chinese apps such as TikTok.

Meta chief Mark Zuckerberg said the company is investing in its video content feature “Reels” to compete with TikTok, and expected ad sales to catch up.

“Reels already makes up more than 20 per cent of the time that people spend on Instagram. Video overall makes up 50 per cent of the time that people spend on Facebook, and Reels is growing quickly there as well,” Mr Zuckerberg said during the earnings call.

The Meta boss also shared details of the company’s higher-end VR headset, codenamed Project Cambria, expected to be released later this year.

This premium device, he said, would “seamlessly blend virtual reality with the physical world”, adding that the company is also building in eye tracking and face tracking so that users’ metaverse avatars can make eye contact and facial expressions.

“We remain confident in the long-term opportunities and growth that our product roadmap will unlock,” Mr Zuckerberg said.

“The questions we face are not going to be resolved overnight, but we’ve also faced a number of these challenges before so I’m confident that we can navigate this period while continuing to invest in our future,” he added.

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