Facebook parent Meta posted its slowest revenue growth since going public, but its share price jumped as profits held up better than expected in the face of several headwinds.
The company booked $7.5bn profit in the January-March quarter, down 21 per cent on the same period last year but above Wall Street’s expectations of about $7.1bn, according to data from S&P Capital IQ.
Revenue came in at $27.9bn, up just 7 per cent on last year, amid continued pressures from Russia’s invasion of Ukraine, increased competition and Apple’s privacy change that have weighed on social media platforms. That was short of analysts’ already damped expectations.
The company said it expected a continuation of negative trends in the current quarter, citing “softness” stemming from the impact of the Ukraine conflict. It forecast a range of $28bn-$30bn for second-quarter revenue. Analysts had hoped the company might exceed $30bn.
But the unexpectedly strong profits and forecasts of lower costs for the remainder of the year appeared to buoy investors in after-hours trading, with shares jumping as much as 15 per cent. The company lowered its outlook for expenses throughout this year to $87bn to $92bn, less than its earlier guidance of $90bn to $95bn.
Advertising revenue, which generates almost all of the company’s income, was $26.9bn. Analysts had been hoping for $27.6bn, according to data from Refinitiv.
Meta said the number of ad impressions across its apps had gone up 15 per cent on last year, even as the price it charges per ad fell 8 per cent.
The company’s “family” of apps — including Instagram and WhatsApp — recorded 2.87bn daily active users in the quarter, a 6 per cent year-over-year increase.
The growth in active users was better than expected at a time when investors are looking closely at how many users, particularly younger ones, are finding alternatives such as TikTok a more attractive place to spend their time online.
“We made progress this quarter across a number of key company priorities and we remain confident in the long‑term opportunities and growth that our product road map will unlock,” said Mark Zuckerberg, Meta founder and chief executive.
Zuckerberg had earlier this year warned investors the company would struggle to meet Wall Street’s lofty expectations, blaming the “increasing competition” of rivals, particularly TikTok.
Apple’s recent privacy changes have also hobbled Meta’s business model, limiting its ability to personalise advertising, its core source of revenue.
After Meta’s disastrous fourth-quarter 2021 earnings, more than $220bn were wiped off its market cap in its biggest stock price decline since becoming a public company in 2012. Shares are still down about 49 per cent since the start of the year.
Zuckerberg at the time blamed growing competition for the distraction of users’ attention. “People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly,” he said then.
Macroeconomic uncertainty, such as heavy inflation and the war in Ukraine, have also prompted some advertisers to trim their budgets. On Tuesday, YouTube owner Alphabet said its ads business had been slowed by the conflict, coming in short of analysts’ expectations.
Earlier on Wednesday, Meta’s share price dropped about 6 per cent after Bloomberg erroneously published earnings figures, later paring those losses to roughly 4 per cent before the markets closed.