Facebook’s parent company received a huge slap in the face

The main numbers of the quarter:

• The number of daily active users of the Meta application family was 3.24 billion people on average in March, which is a 7 percent increase on a year-on-year basis.

• The reach of advertisements jumped by 20 percent, and the average price per advertisement increased by 6 percent compared to the first quarter of last year.
• With revenue of $36.5 billion Meta closed the January-March period of this year, which is a 27 percent increase and exceeded analysts’ expectations, as the consensus was 36.2 billion dollars.
• On the one hand, the advertising business benefits from the stabilization of the economy, and on the other hand, from the fact that Chinese discount web stores such as Temu and Shein spend heavily on advertising on Facebook and Instagram in order to reach as many users as possible. The fastest growing region in the quarter was Asia Pacific, where revenues rose 41 percent.

• The quarterly operating profit is 13.8 billion dollar, which is a 91 percent increase from the level of a year ago, and represents an operating profit level of 38 percent.
• Its net profit amounted to 12.4 billion dollars, and earnings per share were $4.71, compared to $2.2 a year earlier. The analyst expectation was $4.32, so this was also a pleasant surprise.
• The fact that the result increased more than the income is partly due to the fact that the sales and marketing expenses decreased by 16 percent from the level of the previous year.

• The number of employees decreased by 10 percent in one year after the layoffs, to 69,329 people.
• Meta closed the quarter with a cash balance of 58.1 billion dollars, the free cash flow was 12.5 billion dollars in the January-March period.

For the current quarter, the management expects revenue between 36.5-39.0 billion dollars, the average value of which would represent an 18 percent increase compared to the second quarter of 2023.

However, the forecast was disappointing, as it is slightly in the middle of the band at 37.75 billion dollars, which is slightly below analysts’ expectations, the consensus is 38.3 billion dollars. Expectations were heightened, which was also evident from the fact that the price of the papers tripled last year and rose by more than 40 percent this year. The rally was started when Meta announced the “year of efficiency” in February 2023, promising to cut back on unnecessary projects.

Despite the numbers beating the consensus the quarterly quick report was not well received investors, in after-hours trading, Meta’s stock price began to plummet, and the paper fell further after Mark Zuckerberg began speaking on the conference call presenting the quarterly results. The company manager highlighted investments, for example in the field of augmented reality/virtual reality, adding that for the time being they are just burning cash.

The “Reality Labs” business ended the quarter with revenue of $440 million and a loss of $3.85 billion, bringing the total loss since the end of 2020 to $45 billion.

Zuckerberg also said that the company is increasing investments in artificial intelligence.

Meta’s shares fell 15 percent in after-hours trading after the quarterly numbers.

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