Facebook owner Meta had more than £55billion wiped from its market value last night after announcing its third-quarter results.
The group reported another quarter of declining revenues and failed to convince investors that big bets on the metaverse and artificial intelligence were paying off.
Shares in Meta plunged nearly 20% in after-hours trading as the world’s largest social-media platform joined other US big tech groups in warning that an economic slowdown was hammering its advertising businesses as brands spend less on marketing.
The Financial Times says that, on top of the wider macroeconomic woes, Meta faces a confluence of challenges, including rising competition for its Instagram platform from rivals such as short-form video app TikTok and difficulties in targeting and measuring advertising because of Apple’s privacy policy changes.
The company said it expected revenue in the current quarter to be in the range of £26billion to £28billion, compared with analysts’ expectations of £27.7billion.
Net income in the third quarter fell 52% to £3.79billion, below consensus estimates for £4.3billion.
Slowest pace of growth
Meanwhile, revenues fell 4% to £23.86billion - the slowest pace of growth since going public in 2012, after a 1% decline last quarter. That was slightly better than analysts’ estimates for a 5% drop.
Mark Zuckerberg, Meta founder and chief executive, warned the company faced “near-term challenges on revenue” but said “the fundamentals are there for a return to stronger revenue growth”.
On a call with analysts, he doubled down on his biggest bets including developing a short-form video format to rival TikTok, business messaging, and the metaverse.
The Financial Times says he tried to reassure investors that investments in these areas would pay off in the long term.
“I appreciate the patience and I think that those who are patient and invest with us will end up being rewarded,” he said, arguing that the company was doing “leading work” on the metaverse that would be “of historical importance”.
Meta, which expanded headcount rapidly during the pandemic, has faced investor scrutiny for spending heavily on Zuckerberg’s vision of building a digital avatar-filled world known as the metaverse.
No returns for years
Like other virtual and augmented reality projects Meta is working on, this is not expected to generate returns for many years.
Revenues from Reality Labs, its metaverse unit, nearly halved in the third quarter to £245million while losses were £3.19billion compared with £2.24billion a year ago.
The company said it expected operating losses in the unit to “grow significantly year-over-year” in 2023.
“Meta is on shaky legs when it comes to the current state of its business,” said Debra Aho Williamson, an analyst at Insider Intelligence.
“Zuckerberg’s decision to focus his company on the future promise of the metaverse took his attention away from the unfortunate realities of today.”
FTSE 100
The UK's top share index, the FTSE 100, was down 21 points at 7,034 shortly after opening this morning, following yesterday's 42-point gain.
Brent crude futures were 0.30% lower at $95.40 a barrel.
Companies reporting today
- Half-year results: Amazon
- Third-quarter results: Amazon, Anheuser-Busch InBev, McDonald’s, Shell
- Fourth-quarter results; Apple
- Trading update: Inchcape, Lloyds Banking Group, Unilever