Revenue Decline Accelerates For Meta, FB Parent

CNBC Graphic 10/27/22

• Meta CEO Mark Zuckerberg sounded flabbergasted at times during a call with analysts explaining his company’s long-term bets.
• The company said that “Reality Labs operating losses in 2023 will grow significantly year-over-year.”
• “I think we’re going to resolve each of these things over different periods of time, and I appreciate the patience and I think that those who are patient and invest with us will end up being rewarded,” Zuckerberg said.

Facebook parent Meta Platforms Inc. META posted its second revenue decline in a row, as the social-media giant wrestles with a vortex of challenging business conditions that have combined to shave more than half a trillion dollars from its market value so far this year.

The Wall Street Journal reports the company reported quarterly revenue of $27.7 billion, down more than 4% from a year ago, after posting a 1% decrease last quarter. Meta’s share price fell more than 5% on Wednesday, amid a broad selloff of tech shares, and is now trading at a price last seen in 2017.

Meta shares dropped a further 15% in after-hours trading following the earnings report.

Meta is battling a host of challenges, including the tough macroeconomic climate, growing competition from rival TikTok and the fallout from Apple Inc.’s ad-tracking changes, all of which have taken a toll on its massive advertising business.

At least some of those issues are being felt across Silicon Valley, with Google’s YouTube unit posting a decline in advertising revenue on Tuesday and Snap Inc. delivering disappointing results last week.

Meta founder and Chief Executive Mark Zuckerberg said he is encouraged by the progress in responding to the tougher environment. “I have to say that our product trends look better from what I see,” he said on a call with analysts. “I’m pretty confident this is going in a good direction.”

But Meta also is undergoing an ambitious and expensive pivot, away from its core social-media products including Facebook and Instagram, and toward a future centered around the so-called metaverse where users can live, work and play in an immersive online experience.

Meta’s Reality Labs unit, which is driving the company’s virtual-reality and metaverse efforts, posted revenue of $285 million for the quarter, a decline of nearly 49% from a year ago. This was due to lower sales of its Quest 2 virtual-reality headsets, Meta Chief Financial Officer David Wehner said. The unit had an operating loss of $3.7 billion, and the company said it expects that figure will grow significantly next year.

Horizon Worlds, Meta’s flagship metaverse product for consumers, has fewer than 200,000 monthly active users, far less than the company’s original goal of 500,000 users by the end of this year, according to company documents cited by The Wall Street Journal earlier this month.