Facebook parent Meta reports 21% drop in net profit as cost of adverts declines
Facebook’s parent company Meta reported a 21 per cent yearly drop in first-quarter net profit, underpinned by a decrease in the average price of advertisements.
The California-based company earned a net profit of more than $7.4 billion in the quarter that ended on March 31, more than $2bn less than in the previous year. It was 27.4 per cent, or $2.8bn lower than the quarter that ended on December 31.
The social media company’s revenue rose by about 7 per cent annually to $27.9bn in the three months to March, missing analysts’ estimates of $28.2bn. It was about 17 per cent down on a quarterly basis.
Meta’s shares jumped more than 19 per cent to $208.94 a share in extended trading on Wednesday.
“We made progress this quarter across a number of key company priorities ... we remain confident in the long-term opportunities and growth that our product road map will unlock,” Meta founder and chief executive Mark Zuckerberg said.
The number of daily active users, which declined for the first time in the company’s 18-year history in the December quarter, jumped 4 per cent a year in the past quarter to 1.96 billion, exceeding StreetAccount’s estimates of 1.95 billion.
Meanwhile, Facebook’s monthly active users rose by 3 per cent on an annual basis to 2.94 billion as of March 31.
“More people use our services today than ever before and I am proud of how our products are serving people around the world,” Mr Zuckerberg said.
The company’s earnings per share dropped by 18 per cent annually to $2.72, exceeding expectations of $2.56. In the past quarter, advertisement impressions delivered across Meta’s family of apps increased by 15 per cent a year and the average price per advertisement dropped by 8 per cent annually.
Meta’s family of apps includes Facebook, Instagram, Messenger, WhatsApp and other services.
Advertising sales contributed more than 96 per cent to overall sales in the first quarter, growing by about 6.1 per cent on an annual basis to about $27bn in the January-March period.
Revenue from other streams – including reality labs – rose by 24.3 per cent on an annual basis to about $910 million.
The company’s reality labs include augmented and virtual reality-related consumer hardware, software and content.
Meta, which employs 77,805 people, expects its June quarter sales to be in the range of $28bn to $30bn, an annual growth of up to 3.4 per cent, below market expectations.
This future guidance reflects a continuation of the trends affecting “revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine”, Meta’s chief financial officer David Wehner said.
“We continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations, and we are pleased with the progress on a political agreement,” Mr Wehner said.
In a February report, the company threatened to pull Facebook and Instagram from Europe if it found itself unable to keep transferring user data back to the US.
EU regulators have been stuck in negotiations with the US to replace a transatlantic data transfer pact that thousands of companies relied on. It was struck down by the EU Court of Justice in 2020 over fears that the data of citizens would not be safe once shipped to the US.
The company expects this year’s total expenses to be in the range of $87bn to $92bn, lowered from its previous outlook of $90bn and $95bn.
The platform’s capital expenditures, including principal payments on finance leases, were $5.5bn for the first quarter, the company said.
They are expected to be in the range of $29bn to $34bn for the 2022 full financial year, compared to $19.2bn for the last financial year, driven by the company’s investments in data centres, servers, network infrastructure and new offices.
“Something which was even more cheering for investors was that Facebook reduced its overall cost outlook for 2022 to between $87bn and $92bn, from $90bn to $95bn before. It anticipates its family of applications category to contribute the majority of that spending rise, followed by Reality Labs,” said Naeem Aslam, chief market analyst at Avatrade.
We continue to monitor developments regarding transatlantic data transfers and their potential impact on European operations DAVID WEHNER
Meta’s chief financial officer