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Meta released its second-quarter revenue on Wednesday, revealing the company has been in decline since the company went public.
The social media giant warns it is making significant changes before 2023 by cutting costs.
The decision was made to deal with the economic downturn hitting Meta’s main online advertising business.
Revenue
Meta posted $27.7 billion in revenue for the three months that ended September.
Revenues are down 4% year-over-year but still ahead of Wall Street analysts’ expectations.
Meta posted its first quarterly decline in the June quarter.
The company also reported a net income of nearly $4.4 billion, less than half the amount it generated in the same period in 2021.
The revenue is below analysts’ forecasts.
Mark Zuckerberg, founder and CEO of Meta, released a statement saying:
“We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”
Meta stocks
Shares of the social media giant fell nearly 17% in after-hours trading Wednesday after the results were shown.
Demand for online advertising recently declined due to rising inflation and fears of a recession.
Google and Snap have also seen their advertising revenues take a hit.
Meta CFO David Wehner said the average price per ad across the company’s platforms dropped 18% during the quarter.
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App users
Meta user growth is slowing due to competition from rivals like TikTok.
The company had 2.96 billion monthly active Facebook app users at the end of the quarter, up 2% year-on-year.
However, it is also lower than last year’s 6% growth in the same quarter.
Meta’s daily active users of apps grew 4% to 2.93 billion, down from an 11% increase in 2021.
Zuckerberg noted that Instagram now has more than 2 billion monthly active users, while WhatsApp has more than 2 billion daily active users.
The metaverse
The core business challenges come as Meta invests billions of dollars in an ambitious project to build the metaverse.
However, the metaverse is probably years away from being perfect.
Wehner said operating losses from Metaverse ambitions are expected to continue to increase year-over-year in 2023.
The Reality Labs unit lost nearly $3.7 billion in the September quarter.
So far, it has already cost Meta $9.4 billion in 2022.
Additionally, Reality Labs unit sales were down nearly 50% year-over-year in the September quarter.
Changes and reduction
Altimeter Capital, a Meta shareholder, wrote an open letter last week to make changes such as:
- Reduce headcount expenses by at least 20%
- Reduce annual expenditure by at least $5 billion
- Limit investment in the metaverse to $5 billion per year
David Wehner said the company is making significant changes across the board to be more efficient.
Meanwhile, executives said Meta expects its headcount by the end of 2023 to be at or below the 87,314 reported at the end of September.
“We are holding some teams in terms of headcount, shrinking others, and investing headcount growth only in our highest priorities,” said Wehner.
Additionally, the Meta CFO hinted it could shrink its physical office footprint.
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Key investments
During the call, Zuckerberg highlighted three key investment areas for the coming years:
- Meta’s AI discovery engine, which powers Reels and other recommendations
- Ads and business messaging
- Meta’s future vision for the metaverse
Earlier this month, Meta introduced the Meta Quest Pro, its latest virtual reality headset.
The company touted its potential for business customers.
Meta expects quarterly sales to be between $30 billion and $32.5 billion for the last three months of 2022.
The forecast marks a decline of 3.5% year-on-year for the same period last year.
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