Plunge in profits at Facebook parent, but Meta pleases Wall Street after sales rose for first time after three quarters of decline
Meta Platforms has added to the sense of optimism surrounding the tech sector, after it became the third big name player to please Wall Street with its financial performance.
This was despite the Facebook parent posting a plunge in profits, but revenues rose for the first time in almost a year, pleasing investors and sending its shares up 12 percent in extended trading.
Meta, like other big name tech players, is in the middle of a painful cost-cutting exercise that entails significant job losses at the firm.
Last November Meta had announced it was cutting about 13 percent of its employees, or roughly 11,000 jobs.
In March CEO Mark Zuckerberg dropped the hammer and informed staff that he had made the “difficult decision” to axe another 10,000 positions, on top of the 11,000 jobs already announced.
That second round of job cuts was part of Meta’s efficiency drive after a tough 2022, where it contended with a post-pandemic slump in digital ads, coupled with heavy spending on the Metaverse that unsettled some investors.
Zuckerberg recognised this investor concern in February after Meta posted a notable decline in profits, coupled with a third straight quarter revenue decline, which led him to promise investors that 2023 would be a “year of efficiency”.
Now Meta’s first quarter results are out and they show that the firm is still experiencing challenges. That said, the results did provide investors with some hope that the firm is on the right path going forward.
Meta pleased Wall Street when it said that expenses could be less than the company had forecast in March. Meta also beat expectations for first-quarter profit and revenue, which rose for the first time in nearly a year.
For the first quarter ending 31 March, Meta posted a net profit of $5.7bn, down a punishing 24 percent from $7.5bn in the same year-ago quarter. This translated into $2.20 per share from $2.72 a year earlier, but it beat investor expectations of $2.03 a share.
There was good news of the sales side, as revenues rose 3 percent to $28.6bn from $27.9bn a year earlier. This beat an average estimate of $27.66bn in sales.
“We had a good quarter and our community continues to grow,” said Zuckerberg. “Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision.”
Zuckerberg also reportedly added on Wednesday that AI was helping Meta boost traffic to Facebook and Instagram and earn more in ad sales, and it forecast quarterly revenue well above analyst expectations, which of course pleased investors.
That said, Meta warned that it continued to expect operating losses in its metaverse-oriented Reality Labs unit to rise in 2023. Meta of course continues to invest billions of dollars into the unit, which lost $13.7 billion last year.
Meta’s capital expenditures came in slightly under expectations at $7.1 billion for the quarter, after Wall Street had forecast $7.2 billion in capital expenditures.
Looking forward, Meta also narrowed its annual expenses forecast to between $86 billion and $90 billion, down from the $86 billion to $92 billion it had predicted in March.
Meta also provided its customary snapshot of user engagement and other key metrics concerning its social media platforms, with the following noted:
- Family daily active people (DAP) – DAP was 3.02 billion on average for March 2023, an increase of 5 percent year-over-year;
- Family monthly active people (MAP) – MAP was 3.81 billion as of March 31, 2023, an increase of 5 percent year-over-year;
- Facebook daily active users (DAUs) – DAUs were 2.04 billion on average for March 2023, an increase of 4 percent year-over-year.
- Facebook monthly active users (MAUs) – MAUs were 2.99 billion as of March 31, 2023, an increase of 2 percent year-over-year.
- Ad impressions and price per ad – In the first quarter of 2023, ad impressions delivered across the Family of Apps increased by 26 percent year-over-year, but the average price per ad decreased by 17 percent year-over-year.
Meta noted that as of 31 March its total headcount was 77,114 staffers, a decrease of 1 percent year-over-year.
It said that substantially all employees impacted by the November 2022 layoffs are no longer reflected in its reported headcount as of 31 March.
However staff impacted by the March 2023 layoffs are still included in its reported headcount as of 31 March.