Meta Platforms surprises Wall Street with a profit beat

Meta Platforms surprised Wall Street with a profit beat and Facebook returning to user growth, although Meta forecast a conservative revenue outlook for the current quarter.

Its stock rose 19 per cent in after-hours trade on Wednesday.

Meta’s profit soundly beat Wall Street targets at US$2.72 per share, compared with an average analyst estimate of US$2.56, according to IBES data from Refinitiv. The earning beats were tempered by Meta recording its slowest revenue growth in a decade.

Facebook daily active users (DAU), a key metric for advertisers that indicates activity on the platform, were 1.96 billion, slightly higher than the estimate of 1.95 billion, according to IBES data from Refinitiv. Monthly active users came in at 2.94 billion, missing Wall Street estimates by 30 million.

Meta has lost about half of its value since the start of the year, after a dismal February earnings report when Facebook’s daily active users declined for the first time and forecast a gloomy quarter, blaming factors including Apple’s 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.

Total revenue, the bulk of which comes from ad sales, rose 7 per cent to US$27.91 billion in the first quarter, but missed analysts’ estimates of US$28.20 billion, according to IBES data from Refinitiv.

Net income fell 21 per cent to US$7.47 billion in the first quarter, but beat analysts’ estimates of US$7.15 billion, according to IBES data from Refinitiv.

Meta forecast second-quarter revenue between US$28 billion and US$30 billion. Analysts on average were expecting current-quarter revenue of US$30.63 billion. The company said its outlook reflected factors including the war in Ukraine. It also said it was monitoring the potential impact of regulatory moves in Europe.

Russia banned Facebook and Instagram in March, finding Meta guilty of “extremist activity” amid Moscow’s crackdown on social media during its invasion of Ukraine. Meta’s messaging service WhatsApp is not affected by the ban. Meta has also barred advertisers in Russia from creating and running ads anywhere in the world.

Recent earnings reports from Google parent Alphabet Inc and Snap Inc have signalled the impact of the global economic turmoil on digital ads spending, amid rising inflation and geopolitical uncertainty.

Meta lowered its expected 2022 total expenses to between US$87 billion and US$92 billion, down from its prior outlook of US$90 billion to US$95 billion.

Meta saw quarterly revenue of US$695 million for its Reality Labs hardware division, which is home to its augmented and virtual reality efforts. It reported US$3 billion in losses from operations from these metaverse ambitions.

The company has warned it will take billions of dollars and multiple years to realise its aims around building the metaverse, a futuristic idea of virtual environments where users can work, socialise and play. CNA