Mate, Facebook’s mother, has posted the slowest revenue growth since the announcement, but its share price soared as earnings held up better than expected in the face of some headwinds, including the fallout from Russia’s invasion of Ukraine.
The company posted a profit of $ 7.5 billion in the January-March quarter, down 21% from the same period last year, but above Wall Street expectations of about $ 7.1 billion, according to S&P Capital IQ data.
Revenue reached $ 27.9 billion, up just 7% from last year, despite continued pressure from Russia’s invasion of Ukraine, increased competition and a change in Apple’s privacy that has weighed on social media platforms. This was lower than the analysts’ reduced expectations.
The company said it expects further negative trends in the current quarter, citing “softness” resulting from the impact of the conflict in Ukraine. It expects $ 28-30 billion in second-quarter revenue. Analysts had hoped it would exceed $ 30 billion.
But unexpectedly strong earnings and lower-cost forecasts for the rest of the year appear to have strengthened investors in after-hours trading, with shares soaring up to 18%. The company lowered its spending forecast for the year to $ 87 billion to $ 92 billion, less than the previous forecast of $ 90 billion to $ 95 billion.
Overall, the results were “better than feared” by Wall Street, said analyst Jeffries Brent Thiel.
Revenue from advertising, which generates almost all of the company’s revenue, was $ 26.9 billion. Analysts had hoped for $ 27.6 billion, according to Refinitiv data. The dropout rate from the war in Ukraine also weighed heavily on sales. The Kremlin banned Facebook while the social media group blocked Russian advertisers from doing business with the platform.
Meta said that the number of ad impressions on its apps increased by 15% compared to last year, while the price it charges for the ad decreased by 8%.
Mark Zuckerberg, CEO and founder, said his multi-year projects, such as artificial intelligence gambling and metaverse, would be captivating “given our current business growth levels.”
“These investments will be important to our success and growth over time, so I continue to believe we need to finish them,” he told investors on Wednesday.
The company’s reality lab segment – which encompasses its meta-efforts and virtual reality – posted a net loss of $ 3 billion in the quarter from revenue of $ 695 million.
The company’s “family” of apps, including Instagram and WhatsApp, recorded 2.87 billion active users daily in the quarter, up 6 percent year-over-year.
The increase in active users was better than expected at a time when investors are closely examining how many users, especially younger ones, find alternatives like TikTok a more attractive place to spend their time online. Zuckerberg announced an increase in the use of Reels, the imitator of TikTok he recently added to the Instagram app.
Cheryl Sandberg, VP of operations, said the company saw great potential in implementing an advertising model for Reels, which accounted for 20% of all time spent on the Instagram app.
“We have a big consumer involvement in Reels, we have rapid growth,” Sandberg said. “And we have an activation book for putting that kind of consumer engagement and awareness-raising into the experience. It’s going to be a multi-year journey… But it’s one we’m very optimistic about.”
Zuckerberg warned investors earlier this year that the company would have a hard time meeting Wall Street’s high expectations, blaming the “growing competition” of rivals, especially TikTok.
Apples Recent changes to privacy They also thwarted Meta’s business model, limiting its ability to customize advertising, its main source of revenue.
Following Meta’s catastrophic profit in the fourth quarter of 2021, more than $ 220 billion was written off from its market value in the biggest drop in the stock price since it became a public company in 2012. Shares have still fallen about 49% since the beginning of the year before the earnings release on Wednesday.
Zuckerberg at the time blamed the growing competition for distracting users. “People have a lot of options for how they want to spend their time, and apps like TikTok are growing very fast,” he said at the time.
Macroeconomic uncertainty, such as high inflation and the war in Ukraine, have also caused some advertisers to cut their budgets. On Tuesday, the owner of YouTube, Alphabet, said that his advertising business had slowed down because of the conflict, and did not meet analysts’ expectations.
Earlier on Wednesday, Meta’s share price fell about 6% after Bloomberg mistakenly released earnings data, later achieving those losses to about 4% before closing the markets.
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