Meta (FB) stock just dropped 20%…

On Wednesday, Facebook, or Meta (FB), surprised investors by reporting a rare earnings decrease due to its hefty expenditure on its goal for a “metaverse” while still dealing with ad issues on its existing platforms. In the last three months of last year, the business ‘Meta,’ then known as Facebook, reported a net income of about $10.3 billion, down 8% from the same time the year before and below Wall Street analysts’ expectations.

In after-hours trading on Wednesday, FB shares fell more than 20% after the company disclosed poor results, provided weak forecasts, and stated that user growth has slowed. According to a poll of analysts, EPS (earnings per share) came in at $3.67 vs. $3.84 predicted. Revenue was $33.67 billion compared to the $33.4 billion expected.

What could this mean for FB’s shareholders?

FB‘s user count also fell short of expectations. According to analysts, FB’s daily active users (DAUs) were 1.93 billion, compared to expectations of 1.95 billion. Monthly Active Users (MAUs) were 2.91 billion, compared to analysts’ expectations of 2.95 billion. The average revenue per user (ARPU) was $11.57, compared to the $11.38 projected by analysts.

In addition to missing its fourth-quarter revenue and user numbers, FB, which was just renamed Meta, provided disappointing first-quarter forecasts. The number of daily active users (DAUs) on Facebook decreased slightly in the fourth quarter compared to the previous quarter, marking the first time DAUs have fallen.

The earnings drop comes as Meta (FB) invests extensively in virtual reality and augmented reality technology in the hopes of building the metaverse, a so-far-only-conceptual immersive version of the internet that CEO Mark Zuckerberg sees as the company’s future. Simultaneously, Meta is battling a shift to Apple’s iOS that has significantly impacted its primary advertising business.

According to the company, Facebook has been impacted by several causes, including the Apple iOS privacy restrictions and macroeconomic problems. FB attributed the lower-than-expected results to inflation and supply chain concerns, influencing marketers’ expenditures. There’s also a move to items that don’t bring in as much money as the company’s main news stream. People are spending more time watching its Reels films, for example.

“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” FB noted in a statement.

Meta also provided a preliminary revenue prediction for the coming quarter. It stated that owing to “headwinds to both impression and pricing growth” in its advertising division, it anticipates revenue to climb only 3% to 11%. It also stated that its platforms are competing for people’s time. The poor results come after months of harsh press coverage and congressional hearings relating to the ‘Facebook Papers’, as well as a slew of recent high-profile C-Level departures and regulatory discussions about how to keep the digital behemoth in check.

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