Shares of Big Tech company Facebook, now known as Meta, fell more than 20 percent in extended training after the company published its earnings adding that user growth had stagnated alongside weak guidance.
The report for the fourth quarter is Facebook/Meta’s first since it changed its name in reference to the Metaverse, stating that the name represented its venture into other businesses apart from its social media business.
The company reported earnings per share of $3.67, less than $3.84 expected according to a Refinitiv survey of analysts. Revenue surpassed expectations by a tiny margin. The company recorded $33.67 billion, slightly beating the $33.4 billion that analysts estimated, according to Refinitiv.
Facebook reported Daily Active Users (DAUs) of 1.93 billion, below the 1.95 billion that analysts estimated, according to StreetAccount. Monthly Active Users (MAUs) also fell short of analysts’ estimates. Analysts had estimated 2.95 billion while the company reported 2.91 billion. For Average Revenue per User (ARPU), Facebook reported $11.57 beating the $11.38 that analysts forecasted, according to StreetAccount.
Apart from its below-the-expectations earnings, the company also issued weak guidance for the first quarter of 2022. Daily Active Users (DAUs) on Facebook were slightly down in the fourth quarter compared to the previous quarter, marking its first quarterly decline in DAUs on record. The company expects revenue in the first quarter to be between $27 and $29 billion. Analysts had set their estimate at $30.15 billion, according to Refinitiv, meaning 3 percent to 11 percent growth YoY.
The company noted that a combination of factors including Apple’s privacy update to its iOS, inflation and supply chain issues as reasons for its lower-than-expected earnings. It also added that people were shifting toward products that do not generate as much revenue as its core news feed. The company mentioned Reels as one of such products that people have shifted towards. “On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories”, the company said.
Last year, the company announced breaking out its hardware division Facebook Reality Labs into separate divisions, and its core business will be its Family of Apps (FoA) which includes Instagram, Messenger, WhatsApp and Facebook.
In its report, the company mentioned that its Family of Apps delivered revenue of $32.79 billion with an operating income of $15.89 billion in the quarter. Its Reality Labs segment had revenue of $877 million with an operating loss of $3.3 billion.
Facebook’s shares were down 4 percent this year, as of Wednesday’s close.
So far, a number of Big Tech companies including Alphabet, have reported their earnings and irrespective of the challenges, a good number of them managed to surpass analysts’ expectations.