Back in October 2021, Mark Zuckerberg announced to the world that his most prominent accomplishment, Facebook, Inc. was re-branded into Meta Platforms, Inc – or Meta for short. “The next platform will be even more immersive — and embodied internet where you’re in the experience, not just looking at it. We call this the metaverse, and it will touch every product we build,” Zuckerberg wrote, back then, in a founder’s letter.
However, in Meta’s Q4 financial report released in February, the tech giant shared both a drop in profits and a shrinking user base, with the Facebook app losing 1 million daily active users. This led to the biggest one-day crash in the stock market; Meta’s shares plunged 26 per cent and its market value took a major hit, dropping more than $230 billion in a single day.
Likewise, on Wednesday, Meta published the company’s financial report for the first quarter (Q1) of 2022. Similar to February’s dismal financial results, profits in Q1 also declined, down 21% year-over-year. Compared to Wall Street’s targets, Meta reported a Q1 revenue of $27.9 billion (expected: $28.24 billion); adjusted earnings per share (EPS) of $2.72 (expected: $2.56); and ad revenue $27 billion (expected: $27.48 billion).
The tech company cites several reasons for the declining numbers, such as Apple’s iOS privacy changes, reduced ad demand amid global economic turmoil, and loss of revenue in Russia. Meta also anticipates a second-quarter revenue between $28 billion and $30 billion, just shy of the $30.74 billion that Wall Street anticipated for the current-quarter revenue.
It seems that six months following the company’s announcement, Meta is still navigating through its metamorphosis. The two quarters were Meta’s first back-to-back profit loss in over ten years, indicating that not everything is smooth sailing as the company transforms into a new reality.
“Meta is facing Category 5 hurricane headwinds, from engagement to advertising to growth,” Daniel Ives, an analyst at Wedbush Securities, comments, before adding “There’s a sense that the company still doesn’t have its arms around all the changes with the iPhone or with losing users.”
In a turnaround from the negativity though, Meta reported that it added users. According to IBES data from Refinitiv, the number of Facebook daily active users (DAU) increased by 4% to 1.96 billion. “It’s good news that Meta somehow managed to eke out growth in DAU. It needed to show some sort of turnaround from last quarter’s performance,” Insider Intelligence analyst Debra Williamson said. Monthly active users also increased to 2.94 billion, a 3% increase year-over-year.
Despite the concerning numbers, in the after-hours trading on Wednesday, Meta’s shares surged 19 per cent. Further, at the current Meta stock price, the company has a market capitalisation of $474.91 billion.
Even with the recent and current setbacks, Meta’s CEO, Mark Zuckerberg, remains confident in building the metaverse, a futuristic tomorrow that will transform how people will socialize, work, and interact. In his statement on Wednesday, Zuckerberg said, “We remain confident in the long-term opportunities and growth that our product road map will unlock.”
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
