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Meta announced its second-quarter results on Wednesday, revealing that the company had declined since its IPO.
The social media giant warns of sweeping changes ahead of 2023, starting with cost cutting.
The decision was taken to deal with the economic crisis which hit Meta’s main online advertising business.
Meta posted revenue of $27.7 billion for the three months ending September.
Revenues are down 4% year-over-year but still above Wall Street analysts’ expectations.
The company 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 same period last year.
Meta revenues are below analyst forecasts.
Founder and CEO of Meta, Mark Zuckerberg, released a statement:
“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.”
Shares of the company fell nearly 17% in after-hours trading on Wednesday after the earnings announcement.
Demand for online advertising has recently declined because of the rising inflation and recession fears.
Google and Snap have also seen their ad revenue decline.
Meanwhile, Meta CFO David Wehner said the average price per ad across the company’s platforms fell 18% in the quarter.
Read also: Stock market movement largely positive in October this year
The growth of Meta users is slowing due to competitors like TikTok.
The company had 2.96 billion monthly active users on the Facebook app at the end of the quarter, up 2% year-over-year.
However, it declined from last year’s 6% growth in the same quarter.
Meta app’s daily active users grew 4% to 2.93 billion, compared to an 11% increase in 2021.
Zuckerberg noted that Instagram has more than 2 billion monthly active users, while WhatsApp has more than 2 billion.
The core challenges emerge when Meta invests billions of dollars in an ambitious effort to build the metaverse.
However, the metaverse is probably years away from perfection.
Wehner said the operational losses associated with the metaverse in 2023 would continue to increase year-after-year.
The Reality Labs unit lost nearly $3.7 billion in the September quarter.
So far this year, it has already cost Meta $9.4 billion.
Additionally, Reality Labs unit sales were down nearly 50% year-over-year in the September quarter.
Changes and reduction
Altimeter Capital last week wrote an open letter 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 for efficient operation.
Meanwhile, executives said Meta expects the headcount to be around 87,314 or less by the end of 2023, as reported in late September.
“We are holding some teams in terms of headcount, shrinking others, and investing headcount growth only in our highest priorities,” said Wehner.
Additionally, Wehner hinted that Meta might downsize its physical office footprint.
Read also: UK gives breakup order, Meta to comply and sell Giphy
On the analyst call, Zuckerberg focused on 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 its new virtual reality headset, the Meta Quest Pro.
The social media giant made its potential known to professional customers.
Meta expects quarterly revenue of between $30 billion and $32.5 billion for the last three months of 2022.
The forecast expects a decrease of 3.5% compared to the previous year.