Facebook parent Meta Platforms plunged in after-hours trading Wednesday following weaker-than-expected fourth quarter earnings and massive capital spending plans for the coming year.
Updated at 4:47 pm EST
Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report posted weaker-than-expected fourth quarter earnings Wednesday, with the Facebook parent forecasting that spending will close in on $100 billion this year while noting slower user growth rates and a pullback on advertising budgets.
Facebook said profits for the three months ending in December were pegged at $3.67, down 6% from the same period last year and well shy of the Street consensus forecast of $3.84 per share.
Group revenues, Facebook said, rose 20% to $33.67 billion, just ahead of analysts’ estimates of a $33.4 billion, nearly all of it coming from the new ‘Family of Apps’ division the company created last year.
Reality Labs, the division that will house the company’s metaverse plans, generated revenues of $877 million, but lost $3.3 billion for the quarter and $10.2 billion for the year.
Apple’s (AAPL) – Get Apple Inc. Report App Tracking Transparency (ATT) rules have made it difficult for Facebook to measure the success of some of ad campaigns, resulting in delayed or restricted data.
In response, the group has had to boost spending — and hiring — on AI and machine learnings tools to help define user preferences make targeted ads more attractive. Facebook’s 2021 headcount, in fact, was p 23% from the previous year to just under 72,000.
Looking into the 2022 calendar year, Meta said it sees total capital spending in the region of $90 billion to $95 billion, with first quarter revenues likely topping out at $29 billion, compared to the Refinitiv forecast of $30.15 billion.
Meta Platforms Q4 Earnings Live Blog With Eric Jhonsa
“We had a solid quarter as people turned to our products to stay connected and businesses continued to use our services to grow,” said CEO Mark Zuckerberg, . “I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse.”
Meta Platforms shares were marked 22% lower in extended hours trading immediately following the earnings release to indicate a Thursday opening bell price of $255.00 each.
Daily active users averaged 1.93 billion on average for December, up 5% from last year, while monthly active users rose 4% to 2.91 billion. Both tallies, however, were flat to the previous quarter and showed declines in users in the U.S. and Canada.
At the same time, Meta CFO David Wehner noted in the company’s earnings release that “we’re hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets”.
Slowing user growth and falling ad revenues, alongside surging capital expenditures likely goes a long way towards explaining both the disappointing near-term outlook and the stock’s after-hours decline.
