Facebook’s parent company beat analysts’ revenue estimates but offered a weak forecast for the next quarter. It posted revenue of $27.7 billion for the third quarter, higher than the forecast of $27.4 billion, but down 4% from the same period last year. Its earnings per share, which adjust for expenses, were $1.64 – below forecasts of $1.89. Wednesday’s earnings report marks the latest in a string of difficult earnings reports for Meta, which has invested heavily in new products that have struggled to generate revenue over the past year. In February, the company lost $230 billion in market value, the biggest one-day loss in US history, as its stock fell 26%. On Wednesday, the company’s shares fell 18% in after-hours trading as investor concerns grew about the company’s spending on new products. Transmission costs and expenses rose 19% year over year in the third quarter. He has poured large sums of money into metaverse, his virtual reality project, and so far has seen little return. Reality Labs, the metaverse division, posted a $3.7 billion loss this quarter, and the company said it expects those losses to “increase significantly year-over-year” in 2023. Struggling to compete with the growing power of TikTok, Meta also invested heavily in its short-form video content product Reels, but struggled with monetization. The losses reported on Wednesday show that Meta may have focused too much on its new ventures, said Debra Aho Williamson, principal analyst at Insider Intelligence. “Meta is on its feet when it comes to the current state of its business,” he said. “To return to stronger growth, Meta needs to change its operations. It would benefit from less priority in the metaverse and more from fixing its core business.” Investors on Wednesday’s earnings call expressed concern about the losses, asking CEO Mark Zuckerberg about the reasoning behind these “experimental bets.” Zuckerberg defended his choices to focus on the metaverse and other new products, saying he is confident they will pay off. “Over time, these will end up being very important investments for the future of our business,” he said. “This is one of the most historic projects we do. People will look back [this] decades from now and talk about the importance of the work that was done here.” Despite the setbacks, Zuckerberg said he was “pleased” with the “strong engagement” fueled by Reels this quarter and said trends look “better from what I’m seeing than some of the comments I’ve seen suggest” . “While we face near-term revenue challenges, the fundamentals are there to return to stronger revenue growth,” he said. The losses at Meta come as the tech industry and the broader market grapple with economic headwinds, including rising inflation and fears of a recession — with Google parent Alphabet and Microsoft reporting disappointing third-quarter results this week In addition to these broader factors, Meta has also struggled with changes to Apple’s privacy policies enacted in 2021 that undermine its primary advertising model — which the company predicted would cause it to lose $10 billion in ad revenue in 2022. . Meta announced in September a hiring freeze and possible restructuring, leaving many to prepare for layoffs. This comes after its July earnings report, when it forecast its first drop in revenue since it went public in 2012. In a statement accompanying the report, Meta said it would “keep some groups stable in headcount, shrink others and invest headcount growth only in our highest priorities.” “As a result, we expect headcount at the end of 2023 to be roughly in line with third quarter 2022 levels,” the company said.
