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Meta shares surge after Facebook ekes out user growth

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April 27 (Reuters) – Facebook rebounded from a drop in user numbers earlier this year and its parent company Meta (FB.O) posted a profit above Wall Street targets, defying weak investor expectations with a quarterly report that sent shares up 20%.

Meta CEO Mark Zuckerberg also said the company will cut costs and invest in artificial intelligence tools to improve recommendations and ads, a sign Meta is striving to make money while working. about his long-term ambitions to build the metaverse.

Its stock rose 19% in after-hours trading on Wednesday.

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Meta’s earnings comfortably beat Wall Street targets at $2.72 per share, versus an average analyst estimate of $2.56, according to IBES data from Refinitiv. The revenue beats were tempered by Meta recording its slowest revenue growth in a decade.

Facebook’s daily active users (DAUs), a key metric for advertisers, were 1.96 billion, slightly higher than the 1.95 billion estimate, according to IBES data from Refinitiv. Monthly active users hit 2.94 billion, missing Wall Street’s estimate of 30 million.

Meta has lost about half its value since the start of the year, after a dismal February earnings report when Facebook’s daily active users first dipped and it forecast a dismal quarter. blaming ongoing factors including Apple’s privacy changes (AAPL.O). and increased competition from platforms like ByteDance’s TikTok. Read more

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“It’s good news that Meta somehow managed to accelerate DAU’s growth. It was expected to show some sort of turnaround from last quarter’s performance,” said Debra Williamson, analyst at Insider Intelligence.

“However, monthly active user growth is slowing rapidly. A few quarters ago, it could rely on developing markets to keep the growth engine going, but it’s likely that even those high-growth opportunities are starting to dry up,” she said.

Total revenue, the bulk of which comes from ad sales, rose 7% to $27.91 billion in the first quarter, but missed analysts’ estimates of $28.20 billion, according to IBES data. from Refinitiv.

In a conference call with analysts on Wednesday, Chief Financial Officer Dave Wehner cited factors such as a slowdown in e-commerce after rapid growth during the COVID-19 pandemic, as well as a loss of revenue in Russia and reduced advertising demand in a context of global economic uncertainty. On the call, Zuckerberg also echoed previous warnings about the challenges of shifting engagement to features like its Reels short video offering, which generates less revenue than other ad formats.

Russia banned Facebook and Instagram in March, finding Meta guilty of “extremist activity” as part of Moscow’s social media crackdown during its invasion of Ukraine. Meta’s messaging service, WhatsApp, is not affected by the ban. Meta also banned Russian advertisers from creating and serving ads anywhere in the world. Read more

Meta forecasts second-quarter revenue of $28 billion to $30 billion. Analysts on average had expected revenue of $30.63 billion for the current quarter. The company said its outlook reflected factors such as the war in Ukraine and said it was monitoring the potential impact of regulatory measures in Europe.

Recent earnings reports from Google parent Alphabet Inc (GOOGL.O) and Snap Inc (SNAP.N) flagged the impact of the global economic crisis on digital ad spend, amid rising inflation and geopolitical uncertainty. Read more

“I think after Google, expectations were just the worst,” said Rick Meckler, a partner at Cherry Lane Investments, a family-owned investment office in New Vernon, New Jersey. “When they came in with EPS above estimates, I think the people who had shorted the stock and the people who had … dropped out decided to come back.”

Meta lowered its total planned spending for 2022 to between $87 billion and $92 billion, down from its earlier outlook of $90 billion to $95 billion.

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Company executives said on the call that Meta is making significant investments in AI and machine learning to improve advertising capabilities as it grapples with the impact of Apple’s changes. on its operating system, which have made it harder for brands to target and measure their ads on Facebook and Instagram.

But Zuckerberg also said that due to the company’s current growth levels, Meta is slowing the pace of some longer-term investments in its AI infrastructure and its Reality Labs hardware division, which houses its augmented reality efforts. and virtual.

Meta reported quarterly revenue of $695 million for Reality Labs’ hardware division. He reported $3 billion in operating losses due to these metaverse ambitions.

Zuckerberg warned that it would take Meta billions of dollars and years to achieve its goals around building the Metaverse, a futuristic idea of ​​virtual environments where users can work, socialize and play.

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Reporting by Nivedita Balu in Bengaluru and Elizabeth Culliford; Additional reporting by Katie Paul and Lewis Krauskopf; Editing by Peter Henderson and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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