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Facebook shares plunge more than 20% on weak earnings, big forecast miss

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Facebook shares tumbled more than 18% in extended trading after the company reported disappointing earnings and gave a weaker-than-expected forecast.

Here are the results.

Earnings per share: $3.67 vs $3.84 expected, according to a Refinitiv survey of analysts
Revenue: $33.67 billion vs $33.4 billion expected, according to Refinitiv

Wall Street is also watching other key numbers in the report.

Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected by analysts, according to StreetAccount
Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected by analysts, according to StreetAccount
Average Revenue per User (ARPU): $11.38 expected by analysts, according to Street Account

The company, recently renamed to Meta, came in below expectations on daily and monthly active users as well as projections for the next quarter. Facebook said revenue in the first quarter will be $27 billion to $29 billion. Analysts were expecting revenue of $30.15 billion, according to Refinitiv.

Facebook said it’s being hit by a combination of factors, including inflation, privacy changes to Apple’s iOS, potential supply chain disruptions at advertisers and other macroeconomic challenges.

It blamed the lower-than-expected growth in part on inflation and supply chain issues impacting advertisers’ budgets.

There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos.

“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,” Facebook said

The report is Facebook’s first since changing the name of its parent company to Meta, which is a nod to the metaverse. CEO Mark Zuckerberg announced the name change in October following a series of troubling reports about Facebook that stemmed from leaked documents shared by a former employee with journalists, lawmakers and the Securities and Exchange Commission.

Facebook’s results come a day after Alphabet cruised past estimates, sending its stock higher on Wednesday. Despite a January stock slump across tech, the industry giants have delivered uplifting earnings reports, reminding investors of the power of their dominant businesses even in a challenging macro environment. In addition to Alphabet, Apple and Microsoft topped estimates on profit and revenue.

With the name change to Meta comes a new reporting structure. The company said in its last earnings report that it will break out its hardware division, Facebook Reality Labs, into a separate division. Its core business will be Facebook’s Family of Apps (FoA), including Instagram, Messenger and WhatsApp.

The company said it will provide historical segment results for full year 2019 through 2021, as well as quarterly results starting from the fourth quarter of 2020. The new structure will give investors a glimpse into the performance of Meta’s newest business, which Zuckerberg sees as the future of the company.

Meta will continue to report total advertising revenue and advertising revenue by user geography under the FoA group. Ads remain the way Meta will be generating the bulk of its money for the foreseeable future. Analysts are expecting total revenue growth of about 19% in the fourth quarter and a similar rate of expansion for all of 2022.

The company’s shares are down about 4% this year.

This story is developing. Check back for updates.

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