Meta shares fall on weaker forecast and higher Reality Labs charge
Shares of Meta plunged 16.5 per cent in after-hours trading on Wednesday after the company issued a sluggish second-quarter forecast.
The parent company of Facebook also said it expects a substantial increase in operating losses in its Reality Labs division in 2024.
The company said it expects second-quarter revenue to be between $36.5 billion and $39 billion. Its midpoint of $37.75 billion is about 18 per cent higher on a yearly basis but below analysts’ average estimate of $38.3 billion.
Reality Labs, which includes augmented and virtual reality-related consumer hardware, software and content for the Metaverse, reported an operating loss of more than $3.8 billion in the first quarter of the year.
Susan Li, Meta’s chief financial officer, said the company expects Reality Labs’ operating losses to increase “meaningfully year over year” in 2024 due to continuing product development and investments to further increase its ecosystem.
The company reported a 117 per cent annual increase in first-quarter net income to about $12.4 billion. Revenue in the quarter rose 27 per cent to nearly $36.5 billion, marginally beating analysts’ expectations of $36.2 billion.
Meta stopped disclosing Facebook’s daily and monthly active users and is instead sharing a figure called “family daily active people”.
It rose 7 per cent yearly at 3.24 billion in the quarter.
“Amid lower expected revenue and higher operational costs, which will fatally lead to less user acquisition spending, growth in family daily active people could very well hit negative numbers next quarter,” Thomas Monteiro, senior analyst at Investing.com, told The National.
In the first quarter, advertising impressions across Meta’s apps rose by 20 per cent annually, while the average price for an advertisement soared by 6 per cent.
Meta’s family of apps includes Facebook, Instagram, Messenger and WhatsApp.
“It’s been a good start to the year,” said Mark Zuckerberg, Meta chief executive.
“We are seeing healthy growth across our apps and we continue making steady progress building the metaverse as well.”