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As Meta’s revenue decline accelerates, shares plunge 14 percent

A weak forecast for the holiday quarter wiped about $40 billion off Meta’s market value in extended trading.

Facebook’s parent company, Meta Platforms Inc, has forecast a weak holiday quarter and significantly bigger losses from Metaverse investments next year, sending shares down 14 percent.

Wednesday’s forecast wiped about $40 billion off its stock market value in extended trading. Adding to the disappointing outlook, Meta faces slowing global economic growth, competition from TikTok, concerns about significant spending on Metaverse, and the ever-present threat of regulation.

Facebook’s parent company beat estimates for quarterly revenue, which fell 4 percent to $27.7 billion in the third quarter ended Sept. 30, from $29 billion a year ago.

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That deepened a revenue decline that began the previous quarter, when the company posted a first-time revenue drop of 0.9 percent, but it was less steep than the 5.6 percent drop Wall Street expected, data showed. of IBES from Refinitiv.

Meta also posted user growth figures roughly in line with expectations, including a year-over-year increase in monthly active users on its flagship Facebook app.

More worrying was the company’s estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, below analyst estimates of $32.2 billion.

Meta also forecast its total expenses for the full year of 2023 to be in the range of $96 billion to $101 billion above a revised estimate for total expenses for 2022 of $85 billion to $87 billion.

That includes an estimated $2.9 billion in charges in 2022 and 2023 related to “consolidating the footprint of our office facilities.”

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Meta said it is downsizing some teams and investing in roster growth “only on our top priorities.”

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Total costs for the third quarter beat estimates of $22.1 billion, compared with $18.6 billion a year earlier. Analysts had forecast about $20.6 billion.

Net income in the third quarter fell to $4.4 billion, or $1.64 per share, from $9.19 billion, or $3.22 per share, a year earlier, the company’s worst result since 2019 and the fourth consecutive quarter of falling profits.

Analysts had expected a profit of $1.86 per share.

“The concern for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the dollar’s heavy impact on overseas earnings,” said Ben Barringer, an analyst at Quilter Cheviot stock research.

“Given that revenues are down at a time when costs are up significantly, modest growth in users and impressions just isn’t going to bail it out.”

Meta is the latest and one of the biggest ad-reliant tech companies to be hit by a slowdown in marketing spending as inflation soars. On Tuesday, Google parent Alphabet missed quarterly revenue estimates. Earlier, Snap Inc, which owns photo-messaging app Snapchat, saw its shares plunge 25 percent after posting its slowest revenue growth since going public five years ago.

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