Facebook parent company Meta reports first-ever quarterly revenue decline due to advertising revenue impact

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Meta, the parent company of social networking service (SNS) Facebook, recorded its first-ever quarterly revenue decline in the second quarter. The slowdown in the advertising market due to recession concerns and Apple's strengthened privacy protections have significantly reduced personalized advertising revenue on Facebook and Instagram, continuously impacting Meta's performance.

According to Bloomberg and others on the 27th (local time), Meta announced in its earnings report that its second-quarter (April to June) revenue was $28.822 billion (approximately 37.9 trillion KRW), a 1% decrease compared to the same period last year. This marks Meta's first-ever quarterly revenue decline and falls short of market expectations ($28.9 billion). Earnings per share were $2.46, below the market forecast of $2.59.

The main reasons for Meta's deteriorating performance are reduced advertising spending due to recession concerns and decreased ad revenue caused by Apple's strengthened privacy regulations. Bloomberg analyzed, "Due to various economic pressures, marketers have cut back on spending, reducing advertising costs on platforms like Meta," adding, "Apple's privacy rules are making ads on Facebook and Instagram less effective."

Additionally, Meta's Reality Labs division, responsible for the metaverse, virtual reality (VR), and augmented reality (AR), recorded $452 million in revenue in the second quarter but posted a net loss of $2.8 billion. Meta explained that the division's losses are expected to worsen in the third quarter compared to the second quarter.

Despite this performance decline, Meta's daily active users in the second quarter reached 1.97 billion. After recording a historic first quarterly decline to 1.929 billion in the fourth quarter of last year, the number rebounded to 1.96 billion in the first quarter of this year and increased by 10 million more in the second quarter. Initially, the market expected a decrease in daily active users in the second quarter, but the number actually rose.

However, Meta's outlook for the third quarter is bleak. Meta forecasted third-quarter (July to September) revenue between $26 billion and $28.5 billion. Considering the market expects Meta's third-quarter revenue to be $30.3 billion, this forecast falls significantly short. Meta stated, "This outlook reflects the continued weakness in advertising demand experienced during the second quarter," attributing it to broad macroeconomic uncertainties. CNBC reported that "Meta is forecasting a revenue decline for two consecutive quarters."

Mark Zuckerberg, Meta's Chief Executive Officer (CEO), emphasized, "We are focusing and expanding our energy and attention on core priorities that open both short-term and long-term opportunities for Meta, its people, and its services."

Following the earnings announcement after market close, Meta's stock price fell more than 3% in after-hours trading. Meta's stock price has plummeted nearly 50% this year.

Meanwhile, to fill the vacancy left by Chief Operating Officer (COO) Sheryl Sandberg, who is leaving Meta in September, Meta announced that Chief Financial Officer (CFO) David Wehner will move to a new position as Chief Strategy Officer (CSO), and Meta's Vice President of Finance, Susan Li, will take over the CFO role.