Meta share price tumbles after quarterly profit sinks 52% on lower sales

Company records second consecutive quarter of double-digit decline in net profit

Meta's revenue dropped nearly 4 per cent annually to $27.71 billion in the third quarter. AP
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Meta, the parent company of Facebook and Instagram, reported a 52 per cent annual drop in third quarter net profit as it recorded its second consecutive quarterly revenue decline, underpinned by a decrease in average price per advertisement.

Net profit for the three-month period to the end of September skidded to about $4.4 billion, nearly $4.8bn less than the same period a year earlier. It was down about 34 per cent from the second quarter of this year.

This is the second consecutive quarter that the California-based technology conglomerate reported a double-digit drop in net profit.

The share price of the company fell 6 per cent at the close of trading on Wednesday but plummeted 20 per cent in after hours trading to $104.30. The company's stock price has declined almost 62 per cent since the start of the year.

The social media company's revenue dropped nearly 4 per cent annually to about $27.7bn in the third quarter, exceeding analysts’ estimates of $27.4bn, according to Refinitiv, down nearly 3.8 per cent on a quarterly basis.

“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” Meta founder and chief executive Mark Zuckerberg said.

“We are approaching 2023 with a focus on prioritisation and efficiency that will help us navigate the current environment and emerge an even stronger company.”

The platform's number of daily active users grew 3 per cent yearly to reach about two billion in the last quarter. Its monthly active users increased 2 per cent to nearly 2.96 billion.

“Our community continues to grow and I am pleased with the strong engagement we are seeing driven by progress on our discovery engine and products like Reels,” Mr Zuckerberg said.

Advertisement impressions delivered across Meta’s family of apps increased by 17 per cent a year in the third quarter, while the average price for advertisements decreased by 18 per cent annually.

Meta’s apps include Facebook, Instagram, Messenger, WhatsApp and others.

Last quarter, the company’s diluted earnings dropped 49 per cent to $1.64 a share, compared to the $1.89 expected by analysts, Refinitiv reported.

Advertising revenue, which dropped 3.6 per cent a year, added more than $27.2bn to Meta’s overall revenue. It constituted more than 98 per cent of the company’s total sales.

Revenue from other streams rose 9 per cent on an annual basis to nearly $192 million.

The company’s reality labs business — which include metaverse, augmented and virtual reality-related consumer hardware, software and content — recorded a 49 per cent yearly drop to $285m in the third quarter.

Meta’s capital expenditure, including principal payments on finance leases, in the third quarter was more than $9.5bn. It is expected to be in the range of $32bn to $33bn for the 2022 full financial year.

For 2023, the company expects capex to be in the range of $34bn to $39bn, driven by investments in data centres, servers and network infrastructure.

“An increase in AI [artificial intelligence] capacity is driving substantially all of our capital expenditure growth in 2023,” Meta said.

The company, which employs 87,314 employees, repurchased $6.55bn of its common stock in the third quarter. It had more than $17.78bn available and authorised for repurchases as of September 30.

While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth
Mark Zuckerberg, Meta founder and chief executive

The cash and cash equivalents and marketable securities were $41.78bn as of September 30, a yearly drop of 28 per cent, the company said.

Meta expects the 2022 financial year’s total expenses to be between $85bn and $87bn, lowered from its prior outlook of $85bn to $88bn.

This includes an estimated $900m in additional charges related to the office facilities footprint that Meta is expected to record in the fourth quarter.

The company expects its full-year 2023 total expenses to be in the range of $96bn to $101bn.

The company expects sales in its fourth quarter, ending on December 31, to be in the range of $30bn to $32.5bn, said Meta’s chief financial officer David Wehner.

“To provide some context on the approach we are taking towards setting our 2023 budget, we are making significant changes across the board to operate more efficiently,” he said.

“We are holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities.

“As a result, we expect headcount at the end of 2023 will be approximately in line with third-quarter 2022 levels.”

Updated: October 27, 2022, 8:48 AM