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Facebook Manages To Register User Growth, Pushing Up Meta Shares

Facebook Manages To Register User Growth, Pushing Up Meta Shares
Facebook recovered from a decrease in user numbers earlier this year, and its parent company Meta reported a profit ahead of Wall Street goals, confounding low investor expectations with a quarterly report that pushed shares up 20 per cent.
Meta CEO Mark Zuckerberg also stated that the business would cut costs and invest in artificial intelligence techniques to improve suggestions and adverts, indicating that Meta is focusing on making money while also working on its long-term goals of building the metaverse.
Its shares increased 19% in after-hours trading on Wednesday.
According to Refinitiv IBES statistics, Meta's profit easily outperformed Wall Street expectations, coming in at $2.72 per share, compared to an average analyst forecast of $2.56.
The earnings beats were offset by Meta's worst revenue increase in a decade.
According to IBES data from Refinitiv, Facebook daily active users (DAU), a critical metric for marketers, were 1.96 billion, slightly higher than the estimate of 1.95 billion. Monthly active users were 2.94 billion, falling short of Wall Street projections by 30 million.
Meta has lost roughly half of its value since the beginning of the year, following a bleak February earnings report in which Facebook's daily active users fell for the first time and the company forecasted a bleak quarter, blaming ongoing factors such as Apple's privacy changes and increased competition from platforms such as ByteDance's TikTok.
"It's good news that Meta somehow managed to eke out growth in DAU. It needed to show some sort of turnaround from last quarter's performance," Insider Intelligence analyst Debra Williamson said.
"However, growth in monthly active users is slowing quickly. A few quarters ago it could count on developing markets to keep the growth engine going but it's likely that even these high-growth opportunities are starting to dry up," she said.
Total revenue, the majority of which comes from ad sales, increased by 7 per cent to $27.91 billion in the first quarter, but fell short of analysts' expectations of $28.20 billion, according to IBES data from Refinitiv.
On a conference call with analysts on Wednesday, Chief Financial Officer Dave Wehner cited issues such as a slowdown in ecommerce following strong growth during the COVID-19 pandemic, as well as revenue loss in Russia and reduced ad demand amid global economic uncertainty. On the call, Zuckerberg also reiterated prior cautions about the hurdles of shifting engagement toward features such as its short video product Reels, which earns less income than other ad formats.
Russia banned Facebook and Instagram in March after Meta was found guilty of "extremist conduct" during Moscow's invasion of Ukraine. The prohibition has no effect on Meta's messaging service WhatsApp. Meta has also prohibited Russian marketers from generating and running ads everywhere in the world.
Meta expects revenue in the second quarter to range between $28 billion and $30 billion. Analysts expected current-quarter sales of $30.63 billion on average. The company stated that its view incorporated variables such as the situation in Ukraine and that it was studying the potential impact of regulatory changes in Europe.
Recent earnings results from Alphabet Inc's parent company, Google, and Snap Inc have indicated the impact of global economic instability on digital ad expenditure, despite growing inflation and geopolitical anxiety.
"I think following Google, expectations were just for the absolute worst," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey. "When they came in with EPS above estimates, I think people who had shorted the stock and those that had...given up on it decided to come back in."
Meta reduced its projected total expenses for 2022 to between $87 billion and $92 billion, down from a previous range of $90 billion to $95 billion.
On the call, company executives stated that Meta was investing heavily in AI and machine learning to improve ad capabilities as it grappled with the impact of Apple's changes to its operating system, which have made it more difficult for brands to target and measure their ads on Facebook and Instagram.
However, due to current company growth levels, Zuckerberg stated that Meta was limiting the pace of some longer-term investments in its AI infrastructure and Reality Labs hardware division, which houses its augmented and virtual reality projects.
Reality Labs' hardware division generated $695 million in revenue during the quarter. It reported a $3 billion loss from operations related to its metaverse goals.
Zuckerberg has warned that it will take billions of dollars and years for Meta to accomplish its goals of creating the metaverse, a futuristic concept of virtual spaces where users may work, socialise, and play.

Christopher J. Mitchell

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