Meta the next quarterly earnings pariah

The social media giant Meta Platforms (NASDAQ: FB), formerly known as Facebook, issued disappointing guidance for the first quarter in addition to also falling short on its previous quarter user numbers and profit, leaving investors curious about the future of the company.

Pivoting from the classic Facebook website and app, the Meta rebrand aims to move the Company beyond 2D screens and open the door to an immersive world where everything is augmented and seen through virtual reality (the Metaverse).

Since announcing the rebrand, Meta has been experiencing issues across the board, from fighting regulatory battles on multiple fronts to justifying a costly shift in corporate strategy to bet on the Metaverse. But nothing came as more of a surprise than the recent fourth-quarter results that were issued after market close yesterday.

The company said revenue in the first quarter will be in the range of USD $27-$29b, while analysts expected sales in the range of USD $30.15b. This equates to 3% – 11% year-on-year growth, while expectations were around 15%. Their net income for the quarter was USD $10.3b, or $3.67 per share, compared to the $3.84 per share expectations. This is the first quarter on record in which Facebook has reported a drop in Daily Active Users (DAUs) on the site. With user trends towards TikTok and YouTube to blame.

The site has seen a shift away from users using the platform to view their Feed and Stories, and noticed their engagement was focused on video surfaces like Reels, which monetise at significantly lower rates.

Mark Zuckerberg, CEO of Meta, acknowledged that their company is facing stiff competition for user time and attention, “We think it’s definitely the right thing to lean into this and push towards growing Reels as quickly as possible and not hold on the brakes at all, even though it may create some near-term slower growth than we would have wanted.”

In summary, Meta blamed the results on lower-than-expected growth in part on inflation, supply chain issues that are impacting advertisers’ budgets and competition from other social media platforms.

The Company anticipates growth this year that will be driven by investments in products and infrastructure-related costs; they expect total expenses to be in the range of USD $90-95b which will include investments in data centres, servers, network infrastructure, and office facilities.

As Meta continues to develop its Metaverse technology, their Reality Labs and artificial intelligence investments will be kicked into high gear, and this is being reflected in the expected total expenses.

Facebook’s ticker code (NASDAQ: FB) will officially take on their new ticker code NASDAQ:META in the first half of this year. Shares last year reached its peak of $384 in September, then began a downturn, shedding 11% and finishing the year at $338. Following the report, the stock plunged as much as 24% to $244 in after-market trading.