Meta shares rise after Facebook outperforms user growth

Daily active Facebook users, a key metric for advertisers that shows activity on the platform, was 1.96 billion.

Daily active Facebook users, a key metric for advertisers that shows activity on the platform, was 1.96 billion.

Meta Platforms Inc surprised Wall Street with a profit hit and Facebook returned to user growth, despite Meta’s conservative revenue outlook for the current quarter.

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The stock rose 19% in after-hours trading on Wednesday.

According to Refinitiv IBES data, Meta’s earnings comfortably beat Wall Street’s targets at $2.72 per share, compared to an analyst consensus of $2.56. Earnings were mitigated as Meta reported its slowest revenue growth in a decade.

Facebook daily active users (DAU), a key metric for advertisers that shows activity on the platform, came in at 1.96 billion, slightly above the 1.95 billion estimate, according to Refinitiv IBES data. Monthly active users came in at 2.94 billion, missing Wall Street’s estimates by 30 million.

Meta has lost about half its value since the start of the year after posting a dismal gain in February when it first reported a decline in daily active Facebook users and forecast a dismal quarter, citing factors such as Apple’s privacy changes and the increasing Platforms like TikTok by ByteDance were blamed for this.

“It’s good news that Meta somehow managed to push through the growth of DAU. It had to show some kind of reversal from last quarter’s performance,” said Debra Williamson, an analyst at Insider Intelligence.

“However, monthly active user growth is slowing down quickly. A few quarters ago, markets could be relied on to develop to keep the growth engine going, but it’s likely that even those growth opportunities are beginning to dry up,” she said.

Total revenue, which comes mostly from ad sales, rose 7% to $27.91 billion in the first quarter, but missed analyst estimates of $28.20 billion, according to IBES data from Refinitiv.

Net income fell 21% to $7.47 billion in the first quarter, but topped analysts’ estimates of $7.15 billion, according to Refinitiv’s IBES data.

Meta forecast sales of between $28 billion and $30 billion for the second quarter. Analysts, on average, were expecting sales of $30.63 billion for the current quarter. The company said its outlook reflects factors such as the war in Ukraine. It also said it is monitoring the potential impact of regulatory moves in Europe.

Russia banned Facebook and Instagram in March and found Meta guilty of “extremist activities” amid Moscow’s crackdown on social media during its invasion of Ukraine. Meta’s messaging service WhatsApp is not affected by the ban. Meta has also banned advertisers in Russia from creating and serving ads anywhere in the world.

Recent earnings reports from Google parent Alphabet Inc and Snap Inc have signaled the impact of the global economic turmoil on digital advertising spending amid rising inflation and geopolitical uncertainty.

Meta lowered its expected total spending for 2022 to $87 billion to $92 billion, down from its previous guidance of $90 billion to $95 billion.

Meta reported quarterly revenue of $695 million for its Reality Labs hardware division, which houses its augmented and virtual reality efforts. It reported $3 billion in losses from operations stemming from those Metaverse ambitions.

The company has warned that it will take billions of dollars and several years to achieve its goals around building Themetaverse, a futuristic idea of ​​virtual environments where users can work, socialize and play.

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