‘Go back to basics’: Meta shares crater on shaky earnings

The tech giant has shed hundreds of billions of dollars in value as questions mount about Mark Zuckerberg’s vision for the metaverse.

Shares in Facebook parent company Meta have plunged 19 per cent in after hours trading, shedding tens of billions of dollars from its valuation. Picture: Michael Nagle/Bloomberg via Getty Images

Shares in Facebook parent company Meta have plummeted by 19 per cent in after hours trading, shedding tens of billions of dollars from its valuation, after the tech giant flagged heavy losses from its metaverse investments and increased competition from the likes of TikTok.

The company posted its second quarterly revenue decline in a row, as it grapples with slowing global economic growth and widespread doubts about chief executive Mark Zuckerberg’s pet project – the metaverse – which has yet to catch on with users.

Meta’s Reality Labs unit posted revenue of $US285m ($439m) for the quarter – down 49 per cent from a year earlier – and an operating loss of $US3.7bn as the company ignores its critics and continues apace with building what it sees as the future of online interactions.

“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Meta told investors.

“Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”

Shares in Meta are down more than 60 per cent since the start of the year, with the company shedding hundreds of billions in shareholder value. Picture: Noah Berger/AFP

Internal statistics obtained by the Wall Street Journal show that Meta’s flagship metaverse product Horizon Worlds has fewer than 200,000 monthly active users, less than half of Meta’s original goal of 500,000 users by the end of this year.

The statistics also show that users spend a cumulative 17.6 million hours a day watching Reels – Instagram’s video product – which is less than one-tenth of the 197.8 million hours TikTok users spend each day on that platform.

Meta revenue fell 4 per cent in the third quarter while the company’s expenses rose 19 per cent year-on-year to $US22.1bn, with operating incoming slipping 46 per cent year-on-year to $US5.66bn.

“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” Mr Zuckerberg said on an earnings call.

“We’re approaching 2023 with a focus on prioritisation and efficiency that will help us navigate the current environment and emerge an even stronger company.”

Shares in Facebook parent company Meta have plunged 19 per cent in after hours trading, shedding tens of billions of dollars from its valuation. Picture: Michael Nagle/Bloomberg via Getty Images

The company is not only facing an uphill battle to build out new technologies in the form of the metaverse, but privacy changes introduced by Apple last year are also affecting revenues generated by the core Facebook app. Meta said in February those changes, which limit the personal data companies like Meta can collect from iPhone users, would cost it around $US10bn in 2022.

Facebook shares fell more than 19 per cent in after hours trading, bringing its share price down to levels not seen since before former US president Donald Trump was elected.

Shares in Meta are down more than 60 per cent since the start of the year, with the company shedding hundreds of billions in shareholder value.

Technology companies across the board are freezing or reducing headcount, and Meta said it is “holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities.”

“As a result, we expect headcount at the end of 2023 will be approximately in-line with third quarter 2022 levels,” the company said.

Debra Aho Williamson, a principal analyst with Insider Intelligence, said that Meta is on “shaky legs” and needs to return to fixing its core business rather than prioritising the metaverse.

“It’s tough a time to be a big social-media company right now,” she said. “You’re facing a lot of pressures on revenue, usage and the worsening economy on top of it.”

Shares in Snapchat, Google parent company Alphabet and Microsoft are all also down this week amid slowing growth for the challenged technology sector. Apple and Amazon are also set to report their earnings this week.