Meta, the parent company of Facebook and Instagram, has posted its first revenue decline in history, dragged down by a drop in ad spending as the economy falters and competition from rival TikTok intensifies.
The results largely followed a broader decline in the digital advertising market that is also hitting rivals such as Google, Twitter – which also posted a decline – and Snap.
Google’s parent company Alphabet on Tuesday reported its slowest quarterly growth in two years.
CEO Mark Zuckerberg said Meta is slowing its pace of investments and plans to “steadily reduce” employee growth after a hiring blitz earlier this year.
“This is a period that demands more intensity,” he said in a conference call with analysts.
“Expect us to get more done with fewer resources.”
Beyond the economic downturn, Meta faces some unique challenges, including the looming departure of its chief operating officer Sheryl Sandberg, one of the architects of the company’s massive advertising business.
In addition to TikTok, the decline in ad spending among the downturn and Apple’s privacy changes, “questions about Meta’s leadership” – including Sandberg’s exit and negative sentiment about the company as a whole – also contributed to the decline, said Raj Shah, a managing partner at digital consultancy Publicis Sapient.
Meta earned profits of $US6.69 billion, or $US2.46 per share, in the April-June period.
That is down 36 per cent from $US10.39 billion, or $US3.61 per share, in the same period a year ago.
Revenue was $US28.82 billion, down one per cent from $US29.08 billion a year earlier.
“The year-over-year drop in quarterly revenue signifies just how quickly Meta’s business has deteriorated,” Insider Intelligence analyst Debra Aho Williamson said in an email.
“Prior to these results, we had forecasted that Meta’s worldwide ad revenue would increase 12.4 per cent this year, to nearly $US130 billion. Now, it’s unlikely to reach that figure.”
She added that the good news – if it could be called that – is that Meta’s competitors are also experiencing slowdowns.
Meta is in the midst of a corporate transformation it says will take years to complete.
It wants to evolve from a provider of social platforms to a dominant power in a nascent virtual reality construct it calls the ‘metaverse’.
CEO Mark Zuckerberg has described it as an immersive virtual environment, a place people can virtually ‘enter’ rather than just staring at a screen.
The company is investing billions in its metaverse plans that will likely take years to pay off – and as part of its plan renamed itself Meta last year.
“Expect Meta’s decline to continue until Meta can monetise the metaverse, and begin another Meta-reverse,” Mr Shah said.
Meta forecasts revenue of $US26 billion to $US28.5 billion for the current quarter, which is below Wall Street’s expectations.
“This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty,” finance chief David Wehner said in a statement.
Meta said Wehner is being promoted to chief strategy officer, where he will oversee the company’s strategy and corporate development. Susan Li, currently vice president of finance, will replace him as CFO.
Shares of Meta Platforms fell $US6.88, or 4.1 per cent, to $US162.70 in after-hours trading.
The stock had closed up $US10.43, or 6.6 per cent, at $US169.58 on Wednesday in the regular trading session.
Meta’s stock has lost more than half its value since the start of this year.