Three Consecutive Quarters of Decline... Exceeding Market Expectations
[Asia Economy Reporter Yujin Cho] Meta, the parent company of Facebook, posted quarterly revenue that exceeded expectations. While continuing massive investments by promoting new businesses such as the metaverse to diversify its business focused on social media, the trend of sharp profit decline has not been escaped.
On the 1st (local time), Meta announced through its earnings disclosure that its revenue for the fourth quarter of last year was $32.165 billion (approximately 39.61 trillion KRW). This represents a 4% decrease compared to the same period last year ($33.671 billion), but it exceeded Wall Street's estimate ($31.53 billion).
Net profit was $4.652 billion, down 55% from $10.285 billion in the same period last year. Earnings per share were $1.76, below the market estimate of $2.26.
The revenue decline stems from deteriorating advertising revenue due to sluggish performance in its core social media business. Meta suffered a significant blow to its online advertising revenue following Apple's policy changes in 2021, which negatively impacted its earnings.
Apple introduced a feature in its latest operating system version iOS14 that prohibits tracking users' app activity records, dealing a major blow to Facebook's business model, which generates revenue by providing personalized ads to users.
In an effort to diversify its business focused on social media such as Facebook, Meta has continued massive investments by promoting new businesses like the three-dimensional virtual world metaverse and virtual currency, resulting in a sharp decline in profits.
Meta is expected to find it difficult to break the trend of profit decline due to delayed revenue growth recovery this year and increased one-time costs from workforce restructuring.
In its earnings press release on the day, Meta projected first-quarter revenue of $26 billion to $28.5 billion, a 2% decrease compared to the same period last year, continuing the trend of revenue decline for four consecutive quarters. It also anticipated one-time costs of $1 billion due to workforce restructuring.
After the earnings announcement, Meta stated in a conference call that it would repurchase $40 billion (approximately 49.26 trillion KRW) worth of its own shares to boost its stock price.
On the same day, Meta's CEO Mark Zuckerberg said in the earnings announcement, "This year, our management theme is 'the year of efficiency,' and we are focusing on becoming a stronger and more agile organization." Business Insider analyzed this as a message hinting at additional layoffs. In November last year, Meta laid off 11,000 employees, the largest scale in Meta's history.
Meanwhile, Meta's stock price, which closed up 2.79% in regular trading, surged nearly 18% in after-hours trading to the $180 range, driven by the earnings announcement and share repurchase news that boosted investor sentiment.
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