Meta revenue for Q2 2022 drops as it faces increased regulatory scrutiny and a turbulent economy.
Meta, the company formerly known as Facebook, has long performed like clockwork, posting a steadily growing revenue and an ever-growing stream of profit since going public in 2012.
On Wednesday, Meta fell flat on it’s face against gravity as it reported its first-ever yearly decline in revenue for the second quarter. The company reported a 1% drop in revenue to $28.8 billion, with a forecast for further declines in the third quarter.
Meta’s overall profit fell 36 percent to $6.7 billion.
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” chief executive officer Mark Zuckerberg said on a call with investors on Wednesday. “The situation seems worse than it did a quarter ago.”
Meta stock value dove nearly 5% in afterhours trading.
Meta Revenue & Growth Battered by Scandals
The decline in Meta revenue and growth comes as the Silicon Valley behemoth faces a waning ad market due to inflationary pressures. It is also pushing for a complete overhaul of its brand, pivoting from its core social media products to a greater commitment for virtual reality offerings in 2021. The first-ever slowdown in Meta’s revenue history is also in line with recent numbers coming out of other tech firms including Twitter, Snap and Netflix.
The $218 million in Meta’s Q2 earnings reflect non-ad revenue, which includes payments fees and sales of devices like its Quest VR headsets, a steep decline from $497 million last year.
The company’s Reality Labs unit, which is responsible for developing metaverse-oriented technology like the Quest VR headsets, reported sales of $452 million, down from $465 million in the first quarter.
Meta is battling a digital advertising market that is in disarray from increasing inflation and other factors that resulted in a slowdown in ad spending. Earlier this week, it’s rival Alphabet Inc. reported the slowest growth since the second quarter of 2020 when the Covid-19 pandemic slowed demand for advertising in some areas. Twitter Inc. reported a decline in revenue last week, while Snap Inc. reported a steep decline in revenue.
According to Meta, Facebook’s daily active user base increased to 1.97 billion users. The rise confounded analysts surveyed by FactSet who predicted a decline in user numbers.
For the second quarter, the company reported a net profit of $6.7 billion; this is the third consecutive quarter that Meta’s bottom line has decreased. Since the fourth quarter of 2012, the company has not gone through this kind of decline.
Additional Updates
Along with Meta’s Q2 earnings, we also got to learn that starting this fall, David Wehner, it’s longtime CFO, will step into a new role as the company’s first-ever chief strategy officer. Meta’s current vice president of Finance, will be promoted to CFO.
Meta also offered revenue guidance for its third quarter: For the months of July through September, it expects between $26 billion and $28.5 billion in revenue, which is a few billion less than the roughly $30 billion analysts had projected.
As for VR, Zuckerberg is adamant that the “metaverse” will be worthwhile of the significant investment. Over the next years, this will undoubtedly be a very expensive undertaking, he said.
In his call with investors during the previous quarter, Zuckerberg said that these expenses were building the framework for a significant 2030.
