According to reports, Meta Platforms Inc., formerly known as Facebook, is expected to report a 28% drop in first-quarter profits due to declining advertising revenue.
The company is also preparing for another round of layoffs in May, which has resulted in a lack of optimism among analysts for Big Tech this earnings season. Meta eliminated 11,000 jobs last November and another 10,000 last week, and it has already warned employees of further layoffs in May.
It is anticipated that the Menlo Park, California-headquartered company will reveal a net income of $5.3 billion, or $2.01 per diluted share, down from $7.4 billion in the previous year.
The revenue for its Family of Apps and Reality Labs divisions is predicted to stay at $27.7 billion. In November 2021, Meta rebranded from Facebook in a bid to shift focus to the metaverse, which has been struggling to gain momentum. According to The Wall Street Journal, the company decreased its monthly active user target from 500,000 to 280,000 last year.
Monthly Active User (MAU) data for Facebook is considered the primary metric for Meta. Facebook’s MAUs were 2.34 billion in the first quarter of 2022, and analysts anticipate that the company will have 2.99 billion users this quarter. A large user base is crucial for Facebook’s main revenue driver, advertiser spending.
Meta’s stock opened the year at 122.82 and rose over 73% to $213, outperforming the nearly 20% rally in the S&P500 Communication Services sector.
However, analysts are not optimistic about Meta’s performance this quarter, given the company’s recent layoffs and the macroeconomic challenges that are making it more difficult for digital advertising. Tom Forte, an analyst at D.A. Davidson, said, “Expectations are low…that suggests that digital advertising may have taken a step backward in the March quarter.”
Meta Reports Disappointing Q1 Earnings
The expected decline in Meta’s profits and stagnant revenue for the first quarter of 2023, coupled with the announcement of another round of layoffs, is likely to have an impact on the company and the wider digital advertising industry.
To begin with, the decrease in revenue generated from advertisements implies that the digital advertising sector might have experienced a setback during the March quarter.
This is concerning for the industry as a whole, as digital advertising has been a key driver of revenue growth for many companies in recent years. It may also indicate that companies are becoming more cautious about their advertising spend, which could have a knock-on effect on other companies in the industry.
Secondly, the layoffs at Meta could have a significant impact on the company’s employees and their families, as well as the wider community. The loss of jobs could result in financial difficulties for those affected, and could also lead to a decline in consumer spending, which could have a wider impact on the economy.
The lack of optimism among analysts for Big Tech this earnings season, combined with the announcement of layoffs at Meta, suggests that the tech industry may be facing more difficult times ahead. This could result in a shift in investor sentiment towards the industry, which could impact stock prices and valuations.
The expected impact of the decline in Meta’s profits and stagnant revenue, coupled with the announcement of layoffs, could have a wider impact on the digital advertising industry and the wider economy, and could also result in a shift in investor sentiment towards the tech industry.
In conclusion, Meta Platforms Inc. is expected to report a decline in profits and stagnant revenue for the first quarter of 2023 due to declining advertising revenue.
The company is also preparing for another round of layoffs in May, which has led to a lack of optimism among analysts for Big Tech this earnings season.
While Meta’s stock has performed well so far this year, analysts are skeptical about the company’s performance in the current quarter, given the recent layoffs and macroeconomic challenges affecting the digital advertising industry.
