Meta has outperformed analyst projections for its first-quarter earnings, despite ongoing economic challenges and growing competition. This marks a surprisingly positive earnings report for the company.
During the quarter, Meta’s revenue amounted to $28.1 billion, surpassing expectations of $27.66 billion and representing a 3% year-over-year increase. Following the results, shares saw a 9% increase in after-hours trading, instilling investor confidence in a company that has been grappling with a difficult restructuring of its business model.
Declining Net Income
Despite exceeding revenue projections, Meta’s net income declined by 24% year-over-year, from $7.47 billion to $5.71 billion. The company has been grappling with a variety of issues, including challenges in the metaverse and a general decline in advertising spending resulting from a weak economy and changing consumer behavior.
As Covid-19 restrictions have eased, people have spent less time online. Although Meta’s advertising impressions increased by 26% year-over-year, ad prices fell by 17% year-over-year.
This earnings report follows Meta’s recent announcement of mass layoffs, as part of a “year of efficiency” initiative announced by Zuckerberg in February 2023. More than 20,000 employees are expected to be affected by these layoffs, which come after Meta reported a peak of 87,000 employees worldwide in 2022, thanks to increased online activity and inflow of cash during the Covid-19 pandemic.
Meta has faced difficulties keeping up with changing pandemic-fueled trends, resulting in disastrous outcomes. In October, investors wiped $80 billion (£69 billion) off the company’s market value following a disappointing earnings report.
In a statement about its future plans, Meta revealed that it expects to spend between $30-33 billion on capital expenditures in order to expand its AI capabilities. Although artificial intelligence was highlighted in its Q1 press release, the company did not mention its virtual reality program or metaverse, which has received substantial funding.
VR Dept Not Doing Well
That program, Reality Labs, reported lower revenue of $339 million, falling short of the expected $613.1 million, resulting in an operating loss of $3.99 billion versus the anticipated $3.8 billion. Market research firm Forrester’s analyst, Mike Proulx, stated that Meta’s ongoing expenditure issues indicate that it will not be able to resolve its metaverse problems anytime soon.
Proulx also remarked that Reality Labs’ revenue had declined by 50% year-over-year, leading to a bleak outlook for Meta’s metaverse aspirations, at least for the time being. He cited Forrester’s research indicating that less than 24% of online adults in the US expressed excitement for the metaverse.