The company’s profit fell far more sharply. Net income during the quarter declined 36% year-over-year to nearly $6.7 billion, a huge reversal from the year prior when its profit doubled. Meta reported a 14% year-over-year decline in the average price per ad, a troubling sign as online ad demand weakens because of the recent economic downturn.
The number of monthly active users on the Facebook app also declined slightly from the first quarter of 2022, from 2.936 billion to 2.934 billion. On a conference call with analysts on Wednesday, Meta CEO Mark Zuckerberg said the decline was expected and attributed it “to internet blocks related to the war in Ukraine.”
“The number of people using Facebook daily continues to grow,” he said.
Meta’s results follows weeks of ominous reports that the company would return to a stricter performance review process and look to increase worker productivity as it seeks to weather a period of slowing growth and tough competition from newer rivals such as TikTok. Those challenges are coinciding with larger macroeconomic pressures, including rising inflation and recession fears.
“Many teams are going to shrink so that we can shift energy to other areas within the company,” Zuckerberg said on the conference call.
Still, the company’s sales decline is expected to continue into next quarter. Meta said it expects revenue for the current quarter to be between $26 billion and $28.5 billion. Even at the high end, that would mark a 1.76% decline from the prior year.
Meta shares fell as much as 5% in after-hours trading Wednesday following the earnings report before rebounding somewhat.
The stakes are high for the company with that particular division. Meta has bet its future on a still largely hypothetical version of the internet called the “metaverse” that relies on virtual and augmented reality technologies. And that shift is expensive: Meta said it lost $2.8 billion during the quarter from its Reality Labs unit.
Meta CFO Dave Wehner said during the Wednesday call that mergers and acquisitions are “definitely a component” of its strategy to build the metaverse and “we’ll continue to look at acquisitions going forward” despite the challenge by the FTC.
“The social media company faces several challenges in the months ahead, mainly a slowdown in revenue growth due to reduced ad spending, as well as a lack of innovation and introduction of new user-friendly features,” Investing.com senior analyst Jesse Cohen said in an investor note following the earnings report. On top of that, Cohen said, investors also “need to worry about the negative impact of potential regulatory actions by the U.S. government.”
“As we are building out our discovery engine … I want to be clear that we are still a social company,” Zuckerberg said. He added that currently around 15% of content on users’ Facebook feeds (and slightly more on Instagram) is recommended by artificial intelligence from accounts they don’t follow. It expects those number to more than double by the end of next year.
“We’ve made big transitions, like the shift from desktop to mobile or Feed to Stories,” she said. “The investments we’re making in Reels, in our discovery engine, business messaging, controlling our ad system and especially in helping to build the metaverse represent enormous opportunities for our business.”
Meta announced another change to its C-Suite on Wednesday. Wehner will become Meta’s first chief strategy officer on November 1, responsible for “the company’s strategy and corporate development.” Meta’s current VP of finance Susan Li will take over the CFO job.