Facebook shares plunged more than 20% after dismal earnings and fears that user growth has stagnated following the news that the Meta-owned company lost Daily active Users (DAUs) for the first time.
On Wednesday, Meta announced $3.67 earnings per share against the expected $3.84, but the shocking number was that its had 1.93 billion DAUs vs 1.95 billion expected, and 2.91 billion vs 2.95 billion Monthly Active Users expected by analysts.
The one million fall in daily users may seem tiny for an app that has nearly two billion daily users, but it marked the first quarterly decline in DAUs on record – an indication of stagnation.
The company, which was recently renamed Meta, issued disappointing guidance for the first quarter in addition to coming up short on its fourth-quarter profit and user numbers. Revenue in the first quarter will be $27 billion to $29 billion, with analysts expecting sales of $30.15 billion, according to Refinitiv. That would mean 3% to 11% year-over-year growth.
Meta’s fourth-quarter net profit was $10.3 billion, down eight per cent from last year, but it made $33.67 billion in turnover, in line with its forecasts.
Facebook said it’s being hit by a combination of factors, including privacy changes to Apple’s iOS and macroeconomic challenges. It blamed the lower-than-expected growth in part on inflation and supply chain issues that are impacting advertisers’ budgets.
There’s also a shift to products that don’t generate as much revenue as its core news feed. For example, people are spending more time on its Reels videos.
“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetise at lower rates than Feed and Stories,” Facebook said.
David Weiner, CFO, told analysts that global user numbers grew disproportionately in Asia-Pacific during the pandemic, which has since slowed, and an increase in mobile data prices in India.
“In addition to these factors, we believe competitive services are negatively impacting growth, particularly with younger audiences,” Weiner added.
The report is Facebook’s first since changing the name of its parent company to Meta, announced by Mark Zuckerberg in October. This followed a series of leaked documents by a former employee on Facebook’s policies.
Meta’s Reality Labs segment made $877 million in revenue in the quarter, but continued to have large operating loss of $3.3 billion. Its apps saw revenue of $32.79 billion with operating income of $15.89 billion in the fourth quarter.
Meta was widely expected to show better numbers after other tech companies like Alphabet, Apple and Microsoft beat estimates on profit and revenue.
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