Meta/Facebook Shares Surge on Better-than- Expected Quarterly Earnings


Shares of Meta Platforms, the parent company of Facebook, surged after a better-than-analytics earnings report. However, the outlook for the current quarter is weak and below Wall Street estimates.

Shares of Meta Platforms (FB) , the parent company of Facebook, surged more than 18% after releasing a better-than-Wall Street earnings report for the first quarter of 2022.

While Meta's earnings have come in low, there was likely some fear in the market for an even worse result, given that the stock is down 19% in the past six trading days.

Meta's shares have fallen 45.8% since the company added no new users (DAU, MAU) to its app family in the fourth quarter (versus Q3), which is considered the seasonally strongest of the year for digital advertising due to for the Christmas holidays.

Meta Report vs. Analyst Forecasts

  • Earnings per share of $2.72, higher than expected $2.56.
  • Revenue rose 7% to $27.91 billion, below analysts' forecasts of $28.2 billion. Quarterly revenue and earnings statistics on the Meta Platforms Reports page .
  • Daily Active Users (DAU): 1.96 billion, higher than expected 1.95 billion
  • Monthly active users (MAU): 2.94 billion, lower than expected 2.97 billion
  • Average revenue per user (ARPU): $9.54 vs. $9.50 expected.

The Facebook family of apps, including the core app, Instagram and WhatsApp, accounted for 97.5% of revenue for the quarter. The remaining $695 million came from Reality Labs, part of a company that is trying to build products for the metaverse.

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In the apps segment, earnings fell 13% year-over-year to $11.48 billion. Reality Labs lost $2.96 billion over the period, compared to a $1.83 billion loss in the first quarter of 2021.

Facebook has cut its 2022 total spending forecast to somewhere between $87 billion and $92 billion, lower than its previous estimate of $90 billion to $95 billion.

Other social networks also pointed to macroeconomic factors affecting their ad revenue. Snap CEO Evan Spiegel called the first quarter "more challenging than we expected." The company said some advertisers suspended advertising campaigns following Russia's invasion of Ukraine in February.

Revenue from the Google -owned YouTube platform grew just 14% in the first quarter, well below the 25% growth expected by analysts.

Forecast for the second quarter

In the second quarter, Facebook is forecasting revenue in the range of $28 billion to $30 billion, short of analysts' forecast of $30.6 billion.

The company said in a statement that the forecast takes into account continuing trends in the first quarter, including smooth revenue growth that "coincided with the war in Ukraine."

CFO Dave Vener said that due to the loss of users in Russia, where the country's media regulator has restricted its services, the company expects a consistent MAU decline in Europe next quarter, which will more fully reflect the result of this government action.

Digital advertising could also be affected by inflation and Apple's recent privacy changes to iPhone operating systems, which Wehner previously predicted would result in $10 billion in revenue losses in 2022, though he acknowledged the figure is an estimate.

Meta also expects to face a tougher regulatory environment in the future as Europe comes to terms on the Digital Markets Act.

Meta COO Sheryl Sandberg said that while the final text of the law has not been made public, it has generally been in line with expectations. She said she expects the regulatory framework will continue to be a "real challenge" for the entire industry.

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