Facebook parent company Meta recently published its yearly results. Especially the profit in the fourth quarter was lower than expected. The expectations for the first quarter of this year are everything but optimistic. Meta shares plunged 23 percent in hours.
Meta presented the quarterly and annual results under its new name for the first time. The name change doesn’t seem to be doing any financial wonders, as both sets of figures were lower than expected.
In the fourth quarter of 2021, Meta posted total sales of 30 billion euros (33.7 billion dollars). This is a 20 percent increase from the same period in 2020. However, costs rose to a total of 21 billion dollars in this quarter — 38 percent more. As a result, profit fell to $10.3 billion, which is 8 percent less than the year before.
Annual results and Q1 2022 forecast
The tech giant also presented its annual figures for 2021. Meta recorded a total turnover of 118 billion dollars, a 37 percent increase from last year (86 billion dollars). Profits increased to a total of 39.4 billion dollars.
Investors aren’t satisfied with the figures. Expectations for the first quarter of this year are everything but optimistic. Meta expects first-quarter revenue between $27 billion and $29 billion, a 3 percent decrease from last year. Analysts were counting on quarterly revenue of at least $30.15 billion.
Less revenue from ads
Meta gives several reasons for the disappointing figures. The tech giant expects less revenue from ad sales, which is partly due to personal data policy changes in the Apple App Store. As a result, Meta can offer fewer personalized ads.
Another problem is the rise of ‘short video’ platforms such as TikTok. By now, all social media platforms offer this content option. For Meta, this is Reels, which is somewhat of a commercial letdown.
Meta CEO Mark Zuckerberg indicates that the company is not yet fully prepared for this new form of content. However, he expects the loss to be short-lived.
Lastly, Meta says it’s suffering losses by constructing the Metaverse. The Reality Labs business unit, which is responsible for the project, posted red figures across the board.
Share price collapses
Meta’s share price hasn’t coped well. By the first-next market close following the announcement, the share was down by 23 percent. A drop of this significance equals the loss of 200 billion dollars. The shares of competitors Alphabet and Microsoft rose sharply.