Meta shares soar after Facebook “acts” specifically to retain users

Shares of Meta, the parent company of Facebook, rose 18% in extended trading on April 27, after the company reported its financials for the first three months of the year. And this is the result:

-Earnings per share: $2.72 vs. 2.56 USD expected, as suggested by analysts Refinitiv.

-Revenue: $27.91 billion versus $28.2 billion expected, according to Refinitiv

-Daily active users (DAU): 1.96 billion versus 1.95 billion expected, according to StreetAccount

-Average Revenue Per User (ARPU): $9.54 versus $9.50 expected, according to StreetAccount

As can be seen, Facebook has recovered from the decline in users earlier this year. Daily active users on Facebook (DAU), an important metric for advertisers, hit 1.96 billion, slightly above the 1.95 billion estimate, according to IBES data from Refinitiv .

“There was concern that competition from TikTok would start to erode the platform, and that hasn’t happened,” said Gene Munster, managing partner at venture capital firm Loup Ventures.

Shares of the company Meta jumped 18% in trading the same day after the report was released. Meta’s earnings per share beat Wall Street’s target at $2.72 per share, well above Refinitiv analyst median estimate of $2.56 per share, which This also helped send the stock up 18%, and the company also reported a profit of $7.5 billion.

Meta CEO Mark Zuckerberg also said that the company will reduce costs and is investing in artificial intelligence tools to improve recommendations and ads, a sign that Meta is trying to make money. in online advertising on social media platforms, while fulfilling its long-term ambition to build the metaverse.

Meta has lost about half of its value since the start of the year, following a dismal February earnings report as Facebook’s daily active users fell for the first time, and it forecast a dismal quarter, blaming other factors. Continuous factors include Apple’s privacy changes, and increased competition from platforms like ByteDance’s TikTok.

“It’s good news that Meta has generated some growth in the DAU. It should show some change from last quarter’s performance,” said Insider Intelligence analyst Debra Williamson. growth in monthly active users is slowing rapidly,” she said.

In an earnings call with analysts on April 27, Chief Financial Officer Dave Wehner cited factors including a deceleration in e-commerce following rapid growth during the global era. COVID-19 pandemic, as well as loss of revenue in Russia and reduced demand for advertising amid global economic uncertainty. In the report, Zuckerberg also reiterated previous warnings about the challenges of committing to a move to features like the Reels short video offering, which generates less revenue than other ad formats.

Russia banned Facebook and Instagram in March, accusing Meta of committing “extremist activities” amid Moscow’s crackdown on social media during its invasion of Ukraine. Meta’s WhatsApp messaging service is not affected by the ban. Meta has also banned advertisers in Russia from creating and running ads anywhere in the world.

Meta forecast second-quarter revenue in the $28 billion to $30 billion range, down from Refinitiv analysts’ $30.6 billion estimate. The company said its outlook reflects factors including the war in Ukraine and said it was monitoring the potential impact of regulatory moves in Europe.

Other company executives said during this earnings call that Meta is investing significantly in AI and machine learning to improve its advertising capabilities, as they grapple with the impact of these changes. Apple’s changes to their operating system make it difficult for brands to target and measure ads. This affects part of Facebook’s core business. The company said in February that it expected the changes to cost about $10 billion for 2022.

However, Zuckerberg also said that due to current business growth, Meta is slowing down some of its long-term investments in the hardware division Reality Labs, which has augmented and virtual reality efforts.

Facebook changed its name to Meta last January, reflecting CEO Mark Zuckerberg’s efforts to push the company toward a future of working, playing, and learning in the virtual world. Facebook’s family of apps, which includes its core app, Instagram, and WhatsApp, accounted for 97.5% of revenue in the quarter. Reality Labs’ hardware division posted quarterly revenue of $695 million, reporting a $3 billion loss from these metaverse ambitions. Zuckerberg has warned it will take billions of dollars over the coming years to make his goal around building metaversea futuristic idea of ​​a virtual environment where users can work, socialize and play.