Shares of Meta, Facebook’s parent company, rallied after it reported user growth returned, although the company’s profits fell and sales growth slowed.
Jenny Kane / AP
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Jenny Kane / AP
Shares of Meta, Facebook’s parent company, rallied after it reported user growth returned, although the company’s profits fell and sales growth slowed.
Jenny Kane / AP
More people used Facebook in the first quarter than analysts expected, easing concerns about competition from TikTok that caused the world’s largest social network to lose users for the first time last year.
Shares of Facebook’s parent company Meta surged Wednesday afternoon following the release of its latest earnings report – although the company’s profits fell and sales growth was the slowest since it went public. a decade ago.
Investors have been worried about Facebook’s growth since the company last reported financial results in January that showed its daily users dwindling. That created Meta worst day on Wall Street and continues to drag down the stock price, halving the company’s market value since the start of the year.
At the time, CEO Mark Zuckerberg pointed the finger at TikTok, saying the hugely popular short-video app was drawing users and ad dollars quickly. His comments have raised concerns that Facebook and Instagram are losing their appeal to the next generation of Internet users.
On Wednesday, Meta said daily active Facebook users grew to 1.96 billion in the first three months of this year, far exceeding Wall Street’s estimate of 1.94 billion.
Zuckerberg said Facebook and Instagram are working on new products and features to compete with TikTok, including a short video format that mimics Reels, which now accounts for more than 20% of the time people spend on Instagram.
The company will also rely more heavily on artificial intelligence to recommend content to users on Facebook, even if that content isn’t posted by their friends and family or other accounts they follow, CEO said. That’s similar to how TikTok’s main “For You” page works.
Despite a return to user growth, Meta’s revenue grew at its slowest pace since the company went public in 2012. Revenue rose 7% to $27.9 billion, as the battle raged. of Russia in Ukraine and Apple’s New Privacy Settingsthis makes it harder for Meta to sell targeted ads, weighing heavily on the company’s ad business.
Profits fell 21% to $7.5 billion. While that was better than analysts expected, it was the second straight quarter of decline in profit.
The financial strain highlights the challenges Meta faces as it shifts from its current focus on social to the so-called “reverse“a set of immersive virtual experiences that Zuckerberg says are Future of the company.
Meta plans to spend heavily to build the necessary virtual reality software and hardware, and Zuckerberg said it will be many years before the metaverse becomes a fully realized business. For the first quarter, the loss at its supermarket-focused Reality Labs division was nearly $3 billion.
But Meta is looking elsewhere to cut costs and says overall this year it will spend $3 billion less than it initially predicted.
“Given our current business growth, we’re currently planning to slow the pace of some of our investments,” Zuckerberg told analysts on a conference call on Wednesday. . Going forward, he said, the goal is for Meta’s existing social apps to generate enough profits to fund spending on the metaverse.
Gene Munster, managing partner at venture capital firm Loup Ventures, said the results reflect the success Meta is having in managing costs.
“This is in the face of news that the company is overspending,” he Written on Twitter.
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