Meta Platforms Inc.
startled investors with a sharper-than-expected decline in profits and a gloomy outlook in its first earnings report since Chief Executive
outlined a pivot to the metaverse.
Meta shares plunged after the results were announced, dropping more than 20%. If shares dropped that much when trading opens on Thursday, it would wipe more than $175 billion from the tech giant’s market capitalization.
The company said it expected revenue growth to slow because users were spending less time on its more lucrative services. Meta cited inflation as a weight on advertiser spending and estimated that ad-tracking changes introduced by
last year would cost Meta some $10 billion this year.
Meta also lost about a million daily users globally and stagnated in the U.S. and Canada, two of the company’s most profitable markets, the results show.
The results show Facebook’s business under pressure on a number of fronts at a moment when Mr. Zuckerberg is betting the company’s future on VR headsets, AR glasses and virtual worlds, known as the metaverse, in which users can live and work.
“Although our direction is clear, it seems that our path ahead is not quite perfectly defined,” Mr. Zuckerberg told investors during a conference call Wednesday.
Meta executives said they expected first-quarter revenue between $27 billion and $29 billion, representing year-over-year growth between 3% and 11%. Anything below 11% would mark the slowest period of quarterly growth in the company’s history.
Mr. Zuckerberg said the company is investing heavily in its TikTok rival, called Reels, and focused on attracting young-adult users, although those segments aren’t currently as profitable as others. Reels doesn’t make the kind of money that Meta generates on older features such as the news feed and Stories, which allows people to post videos and images that disappear after 24 hours.
“I’m confident that leaning harder into these trends is the right short-term trade-off,” he said, noting that Reels is the company’s fastest-growing product.
Executives likened the shift to Reels to the company’s prior strategic transitions, including its shift to mobile from web about a decade ago and the…
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