Oct 26 (Reuters) – Facebook parent Meta Platforms Inc ( META.O ) on Wednesday forecast a weak holiday quarter and significant losses from its Metaverse investment next year, sending shares down 14%.
The forecast knocked nearly $40 billion off its stock market value in extended trading. In addition to the disappointing outlook, Meta is facing a slow global economic growth, competition from TikTok, concerns about large spending on the Metaverse and the ever-present threat of regulation.
Meta expects to hire about the same number of employees in 2023 as it did at the end of September.
The parent company of Facebook and Instagram beat estimates for quarterly revenue, which fell 4% to $27.7 billion in the third quarter ended September 30, from $29 billion last year.
That deepened a decline in revenue that began last quarter, when the company posted a first-time revenue decline of 0.9%, but was less than the 5.6% decline Wall Street had expected, according to IBES data from Refinitiv.
It also posted user growth figures that were roughly in line with expectations, including a year-over-year increase in monthly active users on Facebook’s flagship app.
CEO Mark Zuckerberg said their TikTok-like short video product Reels now has more than 140 billion plays on Facebook and Instagram, up 50% from six months ago.
Reels’ spending levels on Facebook and Instagram are now $3 billion. He believes Reels has an advantage over rival TikTok as Reels are reshared more than 1 billion times a day.
Of particular concern was the company’s estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, below analysts’ estimates of $32.2 billion, according to Refinitiv data.
Meta also forecast its full-year 2023 costs to be in the $96 billion to $101 billion range, up from a revised 2022 total cost estimate of $85 billion to $87 billion.
That includes an estimated $2.9 billion in costs in 2022 and 2023 related to “consolidating our office space.”
Total expenses for the third quarter came in above estimates of $22.1 billion, compared to $18.6 billion a year ago. Analysts had predicted about 20.6 billion.
“The concern for Meta is that this pain is likely to continue into 2023 as costs continue to be a real challenge and the dollar’s strong impact on overseas earnings,” said Ben Barringer, equity research analyst at Quilter Cheviot.
“Revenues have fallen at a time when costs have grown exponentially, modest user growth and impressions won’t bail you out.”
Net profit in the third quarter fell to $4.40 billion, or $1.64 per share, from $9.19 billion, or $3.22 per share, a year earlier, its worst showing since 2019 and the fourth straight quarter of profit declines.
Analysts were expecting earnings of $1.86 per share.
Reporting by Katie Paul in Palo Alto, Calif. and Chavi Mehta in Bengaluru; Additional reporting by Sheila Dang in Dallas; Edited by Anil D’Silva, Peter Henderson and Lisa Shumaker
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