- Meta Platforms fell 9% on Thursday after the social media company reported its first-ever quarterly revenue decline.
- Meta missed second-quarter revenue and profit estimates and offered underwhelming guidance for the third quarter.
- Meta has fallen 59% from its 52-week high as it faces competition from TikTok and loses revenue from Apple's privacy change.
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The social media giant also offered weaker-than-expected third-quarter guidance as it continues its buildout of Reels, its competitor to TikTok, and suffers from lost advertising revenue due to Apple's IDFA privacy change.
Here were the key numbers:
Revenue: $28.82 billion, down 1% from year-ago revenue of $29.1 billion and below views for $28.9 billion
Earnings per share: $2.46, versus analyst estimates of $2.55
Facebook daily active users: 1.97 billion in June, a year-over-year increase of 4%
For the third quarter, Meta expects revenue of $26 billion to $28.5 billion, which fell short of the average analyst estimate for revenue of $30.5 billion. If Meta's third-quarter revenue falls within its guidance range, it would represent another decline in revenue.
"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It's always hard to predict how deep or how long these cycles will be, but I'd say that the situation seems worse than it did a quarter ago," Meta CEO Mark Zuckerberg said.
But aside from the macro economy, Meta is dealing with competitive pressures that have threatened its growth: the rise of TikTok and Apple's IDFA privacy change that opted-out iPhone users from app tracking. To combat TikTok, Meta is building out its Instagram Reels product.
At the same time, to position the company for longer-term growth, Meta is spending billions of dollars to build the metaverse, which is years away from its full potential and remains an unproven medium for the mainstream consumer.
Falling revenues and rising expenses mean a decline in profits, and that's a losing formula for investors, which is evident in Meta's year-to-date stock decline of 52%.
Despite Meta's disappointing earnings results, Goldman Sachs is sticking with its "Buy" rating on the social media company.
"While debates will likely persist over product transitions and industry platform headwinds in the quarters & years ahead, we remain focused on Meta's large scaled audience across their Family of Apps (an advantage that continued to scale this past quarter) that the company can continue to align on evolving consumption habits in short-form video, messaging, commerce, augmented reality & social connections," Goldman analyst Eric Sheridan said in a Thursday note.