Opinion: Facebook earnings were not as bad as feared, but they were still pretty bad

The results of Facebook’s parent platform, Meta Platforms Inc., weren’t as bad as Wall Street feared, but there’s still not much to cheer about.

When FB,
first-quarter revenue of $ 27.9 billion, below analysts’ consensus expectations of $ 28.3 billion and reflecting an anemic growth rate of 7%. It was the first time the company, formerly known as Facebook, reported a one-digit revenue growth rate since it went public in 2012, and there seems to be an even worse performance.

Revenue has slowed in recent quarters, as Meta chief financial officer David Wehner has warned that it would happen for years, but compared to the March 2020 quarter, when revenue grew 48%, results were even more disappointing. Meta shares, however, rose 18% in off-hours operations, after suffering the worst quarter in its history and falling further in recent days.

Meta blamed the slowdown in revenue on the transition from user preferences to short format video, known on Facebook as Reels. Of course, the best-known name for this type of video right now is TikToks, named for the mobile app that is stealing the attention of all the previously popular Silicon Valley platforms from Alphabet Inc.’s GOOGL.
Snap Inc.’s Snap SNAP,

See also: Google’s problems are leading analysts to point YouTube directly

“We’re handling the headwinds of the change to the short-format video I just mentioned,” Meta CEO Mark Zuckerberg told analysts at a conference call. “In the short term, this means a friction in revenue because Reels’ monetization is lower than Feeds or Stories, but I hope that gets better over time. We’ve seen this kind of multimedia format transition several times before.”

Zuckerberg has handled these transitions before, including the adoption of the Stories format after taking off on Snapchat. He also noted that the transition in 2012 from a desktop feed to a mobile feed for smartphones caused a slowdown in revenue and Facebook’s revenue growth in 2012 was reduced to less than 40% of earnings. of three digits in the first three quarters of 2011.

One-digit growth is another, however, and there are many other complications for Facebook, from the conflict in Ukraine to the changes to Apple Inc.’s AAPL.
switches to iOS to the smoothness of e-commerce after a major acceleration during the pandemic. Zuckerberg’s second-quarter revenue forecast of $ 28 billion to $ 30 billion was even more anemic, implying that Facebook’s first year-on-year revenue drop could come after Facebook reported revenue of $ 29.07 billion in the June quarter of a year ago.

Zuckerberg has focused on virtual and augmented reality as social media has slowed, but the problems facing Facebook will damage those plans for the rest of Meta. His desire to invest heavily in the company’s Reality Labs business meets real reality, as executives cut their capital spending plans for the rest of the year by $ 3 billion and they said they would cut some hiring plans for the year.

In case you’re adding stuff, this is a short-term difficulty in trying to copy TikTok and long-term plan effects to make the metavers occur. No matter how much the stock goes up on Thursday because the results didn’t live up to the worst fears, that doesn’t make those results a good thing for Meta.

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