Facebook parent Meta Platforms Inc has forecast a weak holiday quarter and significantly more losses from Metaverse investments next year, sending shares down 14 percent.
The forecast on Wednesday knocked about $40bn off its stock market value in extended trade. On top of the disappointing outlook, Meta is contending with slowing global economic growth, competition from TikTok, concerns about significant spending on the Metaverse and the ever-present threat of regulation.
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The Facebook parent company beat estimates for quarterly revenue, which fell 4 percent to $27.7bn in the third quarter that ended September 30, from $29bn last year.
That deepened a revenue decline begun the previous quarter, when the company posted a first-ever revenue drop of 0.9 percent, but was less steep than the 5.6 percent decline Wall Street had expected, according to IBES data from Refinitiv.
Meta also posted user growth figures roughly in line with expectations, including a year-over-year increase of monthly active users on its flagship app Facebook.
More worrying was the company’s estimate that fourth-quarter revenue would be in the range of $30bn to $32.5bn, lower than analysts’ estimates of $32.2bn.
Meta also forecast that its full-year 2023 total expenses would be in the range of $96bn to $101bn up from a revised estimate for 2022 total expenses of $85bn to $87bn.
That includes an estimated $2.9bn in charges in 2022 and 2023 related to “consolidating our office facilities footprint”.
Meta said it is shrinking its headcount in some teams and investing in headcount growth “only in our highest priorities”.
Total costs for the third quarter came in above estimates at $22.1bn, compared with $18.6bn the year prior. Analysts had forecast about $20.6bn.
Net income in the third quarter fell to $4.40bn, or $1.64 per share, from $9.19bn, or $3.22 per share, a year earlier, the company’s worst showing since 2019 and the fourth straight quarter of profit decline.
Analysts had expected a profit of $1.86 per share.
“The worry for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the strong dollar impacts on overseas earnings,” said Ben Barringer, equity research analyst at Quilter Cheviot.
“Given revenues were down at a time when costs have grown significantly, modest user growth and impressions simply isn’t going to bail you out.”
Meta is the latest, and among the biggest, ad-dependent tech firms to be hit by a slowdown in marketing spending as inflation soars. On Tuesday, Google parent Alphabet missed estimates for quarterly revenue. Earlier, Snap Inc, owner of photo-messaging app Snapchat, saw its shares tank 25 percent after it posted its slowest revenue growth since it went public five years ago.