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Meta announced its second-quarter revenue on Wednesday, revealing that the company has been declining since it went public.
The social media giant warns it will make radical changes before 2023, starting with cutting costs.
The decision was made to address the economic crisis that hit Meta’s main online advertising business.
Meta posted its revenue of $27.7 billion for the three months that ended September.
Revenues are down 4% year-over-year but still ahead of Wall Street analysts’ expectations.
Meta posted the first quarterly decline in the June quarter.
The company also reported a net income of almost $4.4 billion, less than half the amount in the same period in 2021.
Meta revenue is lower than analysts’ forecasts.
Mark Zuckerberg, founder and CEO of Meta, released a statement:
“We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”
The company’s shares fell nearly 17% in after-hours trading on Wednesday after the results were posted.
Demand for online advertising has declined recently due to rising inflation and worries about a recession.
Google and Snap also saw their ad revenue drop.
Meanwhile, Meta CFO David Wehner said the average price per ad on the company’s platforms fell 18% in the quarter.
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Meta user growth is slowing due to competitors like TikTok.
The company had 2.96 billion monthly active users on the Facebook app at the end of the quarter, up 2% year-over-year.
However, it also dropped from last year’s 6% growth in the same quarter.
Daily active users of the Meta app grew by 4% to 2.93 billion, compared to an increase of 11% in 2021.
Zuckerberg noted that Instagram has over 2 billion monthly active users, while WhatsApp has over 2 billion.
The core business challenges emerge as Meta invests billions of dollars in an ambitious effort to build the metaverse.
However, the metaverse is likely years away from being perfect.
Wehner said operating losses related to Metaverse ambitions will continue to increase year-over-year in 2023.
The Reality Labs unit lost almost $3.7 billion in the September quarter.
So far, in 2022, it has already cost Meta $9.4 billion.
Additionally, Reality Labs unit sales fell nearly 50% year-over-year in the September quarter.
Changes and reduction
Altimeter Capital, a shareholder of Meta, last week wrote an open letter to make changes such as:
- Reduce headcount expenses by at least 20%
- Reduce annual expenditure by at least $5 billion
- Limit investment in the metaverse to $5 billion per year
David Wehner said the company is making significant changes across the board to become more efficient.
Meanwhile, executives said Meta expects its headcount to be around or below 87,314 by the end of 2023, as reported in late September.
“We are holding some teams in terms of headcount, shrinking others, and investing headcount growth only in our highest priorities,” said Wehner.
Additionally, Meta’s CFO hinted that it might downsize its physical office footprint.
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During the analyst call, Zuckerberg focused on three key investment areas for the coming years:
- Meta’s AI discovery engine, which powers Reels and other recommendations
- Ads and business messaging
- Meta’s future vision for the metaverse
Earlier this month, Meta introduced its latest virtual reality headset, the Meta Quest Pro.
The company made its potential known to professional customers.
Meta expects quarterly revenue between $30 billion and $32.5 billion for the last three months of 2022.
The forecast foresees a decrease of 3.5% compared to the previous year.