Facebook user growth has resulted in a boom in Meta shares, Facebook’s parent company, Meta (FB.O), rebounded from a decrease in users early this year, posting a profit ahead of Wall Street estimates and confounding low investor expectations with a quarterly report that pushed shares up 20%.
Mark Zuckerberg, the CEO of Meta, also said that the firm will cut expenses and invest in artificial intelligence technologies to enhance suggestions and adverts, indicating that Meta is focusing on making money while working on its long-term goals to develop the metaverse.
On Wednesday, its shares jumped 19 percent in after-hours trading.
According to IBES statistics from Refinitiv, Meta’s earnings blew beyond Wall Street expectations, coming in at $2.72 per share vs an average analyst forecast of $2.56. Meta’s sales growth was the weakest in a decade, tempering the earnings beats.
According to IBES statistics from Refinitiv, Facebook’s daily active users (DAU), a critical indicator for marketers, were 1.96 billion, slightly higher than the expectation of 1.95 billion. The number of monthly active users came in at 2.94 billion, falling short of Wall Street expectations by 30 million.
After a dismal February earnings report in which Facebook’s daily active users fell for the first time and it forecasted a bleak quarter, Meta has lost roughly half of its value since the start of the year, blaming ongoing factors such as Apple’s (AAPL.O) privacy changes and increased competition from platforms like ByteDance’s TikTok.
“It’s good news that Meta somehow managed to eke out growth in DAU. It needed to show some sort of turnaround from last quarter’s performance,” Insider Intelligence analyst Debra Williamson said.
“However, growth in monthly active users is slowing quickly. A few quarters ago it could count on developing markets to keep the growth engine going but it’s likely that even these high-growth opportunities are starting to dry up,” she said.
According to IBES statistics from Refinitiv, total revenue, which is primarily made up of ad sales, increased 7% to $27.91 billion in the first quarter but fell short of analysts’ expectations of $28.20 billion.
Chief Financial Officer Dave Wehner noted a slowdown in e-commerce following strong growth during the COVID-19 epidemic, as well as a loss of income in Russia and lower ad demand amid global economic uncertainties, in a conference call with analysts on Wednesday. On the call, Zuckerberg highlighted past cautions about the difficulties of moving engagement toward services like Reels, a short video offering that earns less income than other ad formats.
In March, Russia blocked Facebook and Instagram, accusing Meta of “extremist behavior,” as part of Moscow’s social media crackdown following its invasion of Ukraine. The prohibition has no effect on Meta’s messaging service WhatsApp. Advertisers in Russia are also restricted from developing and running advertisements elsewhere in the world, according to Meta.
The second-quarter revenue is expected to be between $28 billion and $30 billion, according to Meta. Analysts predicted $30.63 billion in sales for the current quarter. The business said its forecast was influenced by a number of variables, including the conflict in Ukraine, and that it was keeping an eye on the possible impact of regulatory changes in Europe.
In light of growing inflation and geopolitical instability, recent earnings results from Google parent Alphabet Inc (GOOGL.O) and Snap Inc (SNAP.N) have shown the impact of global economic turbulence on digital ad spending.
“I believe the expectations after Google were absolutely for the worse,” Rick Meckler, a partner at Cherry Lane Investments, a family investment firm in New Vernon, New Jersey, said. “I think investors who had shorted the company and those who had…given up on it chose to come back in when they came in with EPS over forecasts.”
Meta cut its overall spending forecast for 2022 from $87 billion to $92 billion, down from $90 billion to $95 billion before.
On the call, Meta executives said the company was investing heavily in AI and machine learning to increase ad capabilities as it deals with the fallout from Apple’s operating system updates, which have made it more difficult for advertisers to target and assess their advertisements on Facebook and Instagram.
However, Meta was delaying the pace of some longer-term investments in its AI infrastructure and Reality Labs hardware division, which is home to its augmented and virtual reality projects, due to current company growth levels, according to Zuckerberg.
Reality Labs’ hardware branch brought about $695 million in quarterly sales for Meta. It claimed $3 billion in operating losses as a result of its metaverse aspirations.
Zuckerberg has cautioned that realising Meta’s goals of developing the metaverse, a future concept of virtual spaces where people can work, interact, and play, will cost billions of dollars and take years.