Shares of Meta Platforms (FB) are down 20% after the Facebook parent company missed expectations for its fourth quarter earnings and gave disappointing forward guidance.
Facebook reported 2.91 billion monthly users in the fourth quarter, representing no growth for the first time in the company’s history. The social network said it is grappling with increased competition for users’ time, and a shift in interest to video where advertising isn’t as lucrative.
Meta forecast its revenue in the current quarter would be $27 billion U.S. to $29 billion U.S., compared to $30.25 billion U.S. that Wall Street analysts had estimated.
The misses come at a critical juncture for the company, which is fighting regulatory battles on multiple fronts and also trying to justify a costly shift in corporate strategy to bet on the virtual reality metaverse.
For years, it seemed as though Facebook would never stop growing. But now, young users are choosing platforms such as TikTok and YouTube for entertainment and community instead.
Meta’s net income came in at $10.3 billion U.S., or $3.67 U.S. per share, compared with the $3.84 U.S. per share that analysts forecast. Revenue amounted to $33.67 billion U.S., beating the $33.43 billion U.S. that Wall Street analysts estimated.
Meta said last October that it would see a $10 billion U.S. reduction in its operating profit because of investments in Reality Labs.
Meta was warned for months about recent changes to Apple’s (AAPL) iOS software for iPhones, requiring that companies such as Meta ask users for explicit permission to gather data about them that is useful for ad targeting.
Early estimates show that most users decline this tracking, which makes targeted advertising harder. Meta said its sales were down, in part, because of this impact on ad targeting.
The company, which changed its name to Meta last year to indicate its future direction, will be taking on the META stock ticker in the first half of this year. The stock, which currently trades under the ticker symbol FB, had declined 4% this year before today’s big plunge.
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