Meta plunges as Facebook users stall, forecast falls short
Facebook parent Meta Platforms Inc. said user additions stalled in the fourth quarter and gave a disappointing forecast for the current period, raising concerns about the company’s future growth. Its shares plunged as much as 24% in extended trading.
Facebook reported 2.91 billion monthly users in the fourth quarter, representing no growth from the third quarter. The social network is feeling the effects of increased competition for users’ time and a shift in interest to video, where advertising isn’t as lucrative.
Meta said revenue in the current quarter would be $27 billion to $29 billion, compared with analysts’ average estimate of $30.25 billion.
The misses come at a crucial juncture for the Menlo Park, Calif., company, which is fighting regulatory battles on multiple fronts and also trying to justify a costly shift in corporate strategy to bet on the so-called metaverse, the vision for an immersive internet lately championed by Chief Executive Mark Zuckerberg. For years, it seemed like Facebook would never stop growing. Now young users — the future consumers of its advertising — are choosing platforms such as TikTok and YouTube for entertainment and community instead.
The company, which changed its name to Meta last year to indicate its future direction, will be taking on the META stock ticker in the first half of the year, it said Wednesday. Its shares plunged as low as $244 after closing at $323. The stock, which currently trades under the ticker FB, has declined 4% so far this year.
Facebook has long emphasized the strength of its efforts to contain misinformation targeted at Latinos and Spanish speakers. A whistleblower’s leaks show employees raising alarms about the problem.
“Facebook Reality Labs is the great unknown,” Brad Erickson, an analyst at RBC Capital Markets, said in a note to investors. That division, which includes the company’s investments in the metaverse and virtual reality, reported an operating loss of $3.3 billion, as the company disclosed its contribution for the first time.
Meta’s net income was $10.3 billion, or $3.67 a share, compared with the $3.84 a share analysts projected. Fourth-quarter revenue was $33.67 billion, beating the $33.43 billion that Wall Street analysts estimated.
When Meta changed its corporate name, the move was criticized as a distraction from the many problems Facebook has been asked by regulators to fix with its existing networks. But it’s not just branding — resources and talent within Facebook have shifted to the new focus. Meta said in October that it would see a $10-billion reduction in operating profit for the year because of investments in Reality Labs.
It’s the first earnings report since Zuckerberg declared that attracting young people — 18- to 29-year-olds — was the company’s new “North Star.” It’s unclear how the company plans to disclose its progress toward that goal. Meta does not regularly break down users by age. It also doesn’t say how many people use Instagram or messaging service WhatsApp, or how much revenue those properties generate.
Meta has warned for months about recent changes to Apple Inc.’s iOS software for iPhones, requiring that companies such as Meta ask users for explicit permission to gather data about them that is useful for ad targeting. Early estimates show that most users decline this tracking, which makes targeted advertising harder. Meta said third-quarter sales were down in part because of this effect on ad targeting.
