Meta Quarterly Earnings: Highway to Hell
Stocks: USD 129.82 | 7.69 (5.59%) today
Last call: October 26th, 8:00 PM, GMT+4 •
After reporting a loss of $1 billion dollars in the division responsible for its ambitious “metaverse” project, Meta’s stock plunged on Wednesday after the business published mixed results for the third quarter.
The parent company of Facebook reported higher-than-expected revenue but a dismal outlook for the current quarter. For the third quarter, it reported $27.7 billion in sales, which was better than the $27.4 billion that was expected but down from the $29.1 billion it reported in the third quarter of the previous year by 4 percent. Its adjusted earnings per share of $1.64 fell short of analysts’ estimates of $1.89.
The social media Meta Platforms Inc. (META), whose results for the third quarter of the fiscal year 2022 are released on October 26 after the closing bell, might give you some encouraging information.
With a plunge of more than 61% so far in 2022, shares of Meta, which operates the Facebook, Whatsapp, Insta, and Messenger platforms, are on track for the worst annual performance in the company’s history. This compares to a drop of almost 20% for the S&P 500 index.
The most severe bear market decline among the Nasdaq’s technology megacaps has caused Meta’s share price to fall to levels that were last seen in 2016. These levels were revisited in 2018 as a result of scandals involving Facebook’s violation of users’ privacy and the platform’s use to influence elections.
This year’s issues have been more routine, but they have not been any less devastating. The company reported its first-ever year-over-year quarterly revenue decline for Q2 2022. It stated that its Q3 revenue outlook tends to reflect a continuation of the weak advert demand environment it experienced all through the second quarter. The company believes that this fragile marketing demand environment is being driven by broader macroeconomic uncertainty.
According to the U.S. Dollar Index, the strong U.S. dollar has increased by 5% over the past three months. This strong dollar has been an extra headwind, and Meta predicted in July that it would likely set back Q3 revenue by 6%.
As the demand for advertisements and their prices rose in response to the economic recovery, Meta’s fiscal 2021 results were its best ever, with yearly revenue and adjusted EPS climbing 37% and 36%, respectively. Meta’s stock dropped more than 26% the day following the Q4 2021 report, a harbinger of upcoming difficulties, as the business forecast below-target sales for Q1 2022.
Even though revenue missed estimates and adjusted EPS topped them, the stock did better after the Q1 2022 report, rising by 18% the next day. For Q2 2022, Meta reported earnings and revenue that fell short of analysts’ consensus projections, causing the stock price to drop by 5.2% the following day.
Advertising is the main driver of revenue for Meta, and the company’s marketers are keen to connect with users of the company’s many social media platforms.
That’s why the number of “family monthly active individuals” is such a useful metric for understanding how many people each property in Meta’s family attracts each month. This is the company’s best estimate of the total number of people who have signed up for or logged into at least one of Facebook, Instagram, WhatsApp, or Messenger in the past month. In Q2 2022, Meta reported 3.65 billion family MAUs, up from 3.51 billion in Q2 2021.
Meta needs an estimate of how many accounts across all of its services are utilized by more than one person so that no user with multiple accounts is counted more than once in order to verify that its count of family monthly active persons represents unique users.
According to the business, it is able to detect and remove duplicate accounts thanks to the employment of sophisticated methods, algorithms, and machine learning models. Its machine-learning models are tuned using data from customer surveys and internal evaluations of small subsets of user accounts. According to Meta’s calculations, the monthly active individuals metric for families has a 3% margin of error.