Meta Platforms (META) delivered weaker-than-expected results for Q2 ended June 30, 2022. Revenue and earnings missed consensus estimates. It also issued a gloomy outlook for Q3 2022, citing a weak advertising environment.
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Meta Platforms’ stock closed 6.6% higher at $169.58. However, it fell 4.7% in extended trading hours following disappointing Q2 2022 results.
Revenue and Earnings Miss Estimates
Revenue in the quarter was down 1% to $28.82 billion from the year-ago quarter. According to the Wall Street Journal (WSJ), it is the first time that the company’s quarterly revenue has dropped compared to the year-ago quarter. The figure missed consensus estimates of $28.94 billion. Total costs and expenses came in at $20.46 billion, a 22% increase from the year-ago quarter.
Net income fell 36% to $6.69 billion from the year-ago quarter. Diluted earnings per share (EPS) fell 32% to $2.46 from the year-ago quarter. The figure was worse than the analyst estimate of $2.56 a share.
Other Key Operating Metrics
Facebook daily active users (DAUs) stood at 1.97 billion on average for June 2022, a 3% increase from the year-ago period. On the other hand, Facebook’s monthly active users (MAUs) increased 1% from the year-ago period to 2.93 billion as of June 30, 2022.
Ad impressions delivered across Meta Platforms Apps in the quarter increased 15% from the year-ago quarter. However, the average price per ad was down 14%.
Meta Platforms also repurchased $5.08 billion worth of Class A common stock in the quarter.
Muted Q3 2022 Outlook
Meta Platforms expects Q3 2022 revenue to range between $26 billion and $28.5 billion. According to IBES data from Refinitiv, analysts were expecting revenue of $30.52 billion. The revenue guidance reflects a weak advertising environment driven by macroeconomic uncertainty. In addition, the company expects Q3 revenue at Reality Labs to be lower than Q2 revenue.
Total expenses in Q3 are expected to range from $85-$88 billion, down from the previous outlook of $87-$92 billion. The lowered guidance is in-line with the company’s plan to reduce hiring and overall expenses to account for the challenging operating environment.
Management’s Commentary
Despite Meta Platforms missing estimates on revenue and earnings, Chief Executive Officer (CEO) Mark Zuckerberg insisted, “It was good to see positive trajectory on our engagement trends this quarter coming from products like Reels and our investments in AI. We’re putting increased energy and focus around our key company priorities that unlock both near and long-term opportunities for Meta and the people and businesses that use our services.”
Wall Street’s Take
The Street is optimistic about the stock, with a Moderate Buy consensus rating, based on 29 Buys, eight Holds, and two Sells. The average Meta Platforms price target of $255.41 implies 50.61% upside potential from current levels.
Key Takeaway for Investors
Meta Platforms’ core advertising business has started to take a hit owing to macroeconomic uncertainty. Consequently, revenue and earnings miss should be a point of concern.
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