In the first quarter of its “Year of Efficiency,” social media giant Meta beat analyst estimates after it released its financial results for the first quarter of the year. For the quarter ended March 31, 2022, the parent company of Facebook, Instagram, and WhatsApp reported better-than-expected earnings and a growth of 3% YoY in its revenue, which amounted to $28.65 billion.
In comparison, Meta had recorded $27.9 billion in the corresponding quarter in the previous year. Its income from operations dropped by 15% YoY to reach $7.2 billion, while its operating margin dropped to 25%. Meta also clocked a fall in its net income – a decrease of 24% to $5.7 billion, while its diluted earnings per share (EPS) dropped by 19% to reach $2.20 per share for the first quarter of the year. Restructuring charges reduced Meta’s EPS by another 44 cents.
Nonetheless, the overall earnings report is mostly a positive one amidst an economic downturn, rising competition, and large-scale layoffs. Meta’s numbers beat the estimates set by Wall Street – they expected Meta to record $27.65 billion in revenue and $2.03 in EPS. For the current quarter, the Facebook parent expects to record revenue in the range of $29.5-32 billion, while analysts were expecting sales of $29.5 billion. It is also expecting its total expenses for the year to remain in the range of $86 billion to $90 billion, while capital expenditures will remain in the range of $30-33 billion. Meta said that this figure accounts for its increased investments in AI and its ad-supported products like the newsfeed and Reels.
This earnings report, coupled with better-than-expected guidance for the current period, resulted in a rise of 12% in Meta’s shares in extended trading on Wednesday. Currently, the shares of the company are trading at $208.40 per share, continuing the recovery of Meta’s shares this year after they lost two-thirds of their value in the previous year.
“We had a good quarter and our community continues to grow,” said Mark Zuckerberg, founder and CEO of Meta. “Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.” Revenue from advertising rose during the quarter from Q1 2022 to reach $28.1 billion, making up the majority of Meta’s revenue and further highlighting the company’s over-reliance on advertising.
In its Q1 results, Meta elaborated that Facebook averaged 2.04 billion daily active users in March, which is an increase from 2 billion in the prior quarter and exceeding the estimated 2.01 billion. Across all its apps, Meta reported daily active users of 3.02 billion on average for March, an increase of 5% year-over-year. Its monthly active users for Facebook amounted to 2.99 billion for the quarter, while the same for its Family of Apps rose by 5% YoY to reach 3.81 billion.
Speaking of Family of Apps, the unit brought in $11.2 billion in income from operations, a slight drop from the $11.4 billion it clocked in the corresponding quarter in the previous year. Reels, the company’s short-form video product, according to Meta, and Zuckerberg added that it is increasing the overall engagement on apps. He elaborated that users on Facebook and Instagram currently share Reels 2 billion times per day, even as it competes with the likes of TikTok and YouTube Shorts.
Zuckerberg, in its earnings call, spoke on Meta’s work in artificial intelligence, which he said has been a “major investment for us.” He claimed the company now has the capacity to do “leading work” in AI “at scale.” Both AI and the metaverse remain the buzzwords for Meta, even though it is yet to deliver concrete results on either front.
It has been over one-and-a-half years since the company rebranded itself from Facebook to Meta to signal its shift toward “metaverse” products and services, but is yet to yield proper results. Meta Meta’s Reality Labs division, which includes its Quest VR headsets and its work to bring the metaverse to life, continues to bleed and see its losses pile up. In Q1 2023, the Reality Labs segment generated $339 million in revenue (a decrease of 51%) and an operating loss of $3.99 billion (an increase of 35%). Despite this, Zuckerberg informed that it is not prioritizing AI over its work in the metaverse, even at a time when the AI race is intensifying between the likes of Microsoft and Google.
