TOPLINE
Facebook parent Meta Platforms reported earnings Wednesday that fell short of expectations, pummeling the company’s stock in after-hours trading as the social media giant with metaverse ambitions scrambles to cut costs amid advertising headwinds spurred by concerns about the global economy.
KEY FACTS
Meta reported a net income of $4.4 billion, or $1.64 per share, cratering 49% year over year and falling short of expectations for $1.89 per share; revenue of $27.7 billion fared slightly better than the $27.4 billion analysts were forecasting, but down 4% from one 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.
In a pre-earnings note, Bank of America analyst Justin Post downgraded shares of Meta to a neutral rating, saying the firm’s investment in the immersive virtual reality world known as the metaverse “will remain [an] overhang” on the stock, costing an estimated $10.7 billion next year even as economic concerns potentially intensify.
The report comes less than a month after Meta announced plans to cut costs by restructuring some teams and instituting a hiring freeze as advertising revenue growth slows amid economic pressures, which are quickly mounting: On Monday, an investor with more than $300 million worth of shares urged the company to further slash expenses by laying off employees.
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; in the third quarter, the company’s free cash flow, which measures cash left over after operating expenses, cratered to $173 million from $9.5 billion a year ago.
FORBES VALUATION
$47.2 billion. That’s how much Meta founder Mark Zuckerberg, 38, was worth when the market closed on Wednesday. At one point worth more than $130 billion, Zuckerberg’s fortune has plunged by more than 60% since Meta stock peaked in September 2021.
KEY BACKGROUND
Global economies have started to slow down as central banks including the Federal Reserve work to combat inflation by tempering consumer demand with higher interest rates. Recent earnings reports have started to reflect the pressures. On Tuesday, Alphabet stock plunged after the Google parent missed third-quarter sales and profit expectations. The company’s YouTube advertising unit posted a much weaker-than-forecast $7.1 billion, versus average expectations of about $7.5 billion. In a note, analyst Adam Crisafulli of Vital Knowledge pointed out that YouTube and social media advertising is typically much less resilient during economic downturns than other types of ads.
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 from what we’re seeing it doesn’t yet seem like it has, so we want to plan somewhat conservatively.”