The biggest social network in the world isn’t getting any bigger.
Meta posted its fourth quarter earnings Wednesday, sharing financials that disappointed Wall Street enough to send its stock into a nose dive. Shares of the company, still trading under the ticker symbol FB for now, plunged 20% as the numbers hit.
In the fourth quarter, Facebook generated revenues of $33.67 billion, leading to operating income of $12.59 billion, and net income of $10.29 billion. The company also posted earnings per share of $3.67.
How did those figures compare to analyst expectations? Per Yahoo Finance averages, analysts had expected the company to post $33.41 billion in revenue, and earnings per share of $3.84 billion. So Facebook managed solid top line even if it missed on per-share profit.
The profit miss was not merely a few cents per share, however; it’s a bigger problem for the firm. To make the point, let’s do some year-over-year comparisons. In Q4 2020 Meta had operating income of $12.76 billion, or about 46% of its revenues in the same period. The latter figure fell to just 37% in its most recent quarter. That’s a dramatic decline in operating profitability to stomach.
Inside the rising costs that shed profitability at Meta are its VR or so-called metaverse investments.
Reality Labs, what Facebook says includes its “augmented and virtual reality related consumer hardware, software and content,” brought in $877 million in revenue during its most recent quarter, up from $717 million in the 2020 Q4 period. However! Reality Labs’ operating loss was $3.3 billion in Q4 2021, sharply higher than its $2.1 billion in Q4 2020.
In short, the metaverse push at Meta is so far not the goldmine that its core business has proved over the years. And that lack of easy profit is harming the company’s overall results. Metaverse is far from the shits-gold-a-verse that the company clearly expects it to become in time.
Things get worse for Meta if we look ahead. The company’s CFO said that it expects “first quarter 2022 total revenue to be in the range of $27-29 billion,” which works out to growth of 3% to 11%. Which is not good. Analysts had expected Meta to generate $30.14 billion in Q1 2022 top line, so the company’s guidance is freaking miserable.
Down went the stock.
While Meta’s last quarter saw some expected trends play out, including Apple’s iOS privacy changes dampening its ad business, it also surfaced the novel fact that Facebook, Meta’s core app, is no longer attracting new users.
Facebook’s monthly active users (MAUs) remained flat from the third quarter of 2021 to the fourth at 2.9 billion. Worse, its daily active users (DAUs) fell from 1.93 to 1.929 billion in the same period — a first for Facebook, which is known for a growth-at-all-costs approach.
Some of this is intuitive. Facebook is a mature product (to put it gently) and there are only so many humans in markets around the world left for the company to sign up. And the company is putting more emphasis than ever on its “family” of apps, including WhatsApp and Instagram, fresher products that likely still have a ways to go to reach that kind of saturation.
The user growth slowdown came in the same quarter that the company formerly known as Facebook announced that it would rebrand as a “metaverse” company, complete with plans to steer its resources toward building immersive virtual experiences.
The good news for Meta is that it still owns the world’s biggest social graph. The bad news? Even if a user slowdown was expected, it’s just one more thing making Facebook — and consequently Facebook’s “Family of Apps,” as Meta calls it — look more like a relic from the past rather than a shining vision of the future.
