- Analysts estimate EPS of $3.84 vs. $3.88 in Q4 FY 2020.
- Monthly active users are expected to rise YOY, but at less than half the pace of the year-ago quarter.
- Revenue is expected to increase, but at the slowest pace since Q2 FY 2020.
Facebook, which was renamed Meta Platforms Inc. (FB) in October 2021 to reflect its increasing focus on the metaverse, is seeing the pandemic-induced boost to its growth begin to fade. Both revenue and earnings growth slowed significantly in the third quarter after several quarters of accelerating increases at the world's largest social network. Now, Chief Executive Officer (CEO) Mark Zuckerberg is investing heavily in virtual and augmented reality on the bet that the metaverse will become the next phase of the internet and fuel the company's future growth long term.
Investors will be watching to see how Meta plans to reverse its slowing growth—both in the short term and the long term—when it reports earnings on Feb. 2, 2022 for Q4 FY 2021. Analysts expect the company to report its first earnings per share (EPS) decline since the second quarter of FY 2019 as revenue growth decelerates to its slowest pace in six quarters.
Investors will also be focusing on Meta's monthly active users (MAUs), a key metric that measures the size of the company's user base. Despite the name change to Meta and the devotion of significant resources to building out the metaverse, the company is still primarily a social media business that sells advertising space on multiple social media platforms. Facebook, which is owned by Meta, is still the name of the company's main social media platform and brand. Analysts expect the company's MAUs to rise at their slowest pace out of any quarter in at least four years.
Shares of Meta have performed on par with the broader market over the past year. The stock led the market between mid-March 2021 and late October 2021, hitting a peak performance gap around early September. But it then slipped into a steep decline and its performance dipped below the market in October. It has oscillated between underperformance and outperformance ever since. Meta's shares have provided a total return of 19.6% over the past year, essentially in line with the S&P 500's total return of 19.7%.
Facebook (Meta) Earnings History
Meta, which was still named Facebook at the time, reported mixed Q3 FY 2021 earnings results. EPS beat analysts' expectations, rising 18.5% compared to the year-ago quarter. It was the slowest pace of EPS growth since the fourth quarter of FY 2019. Revenue missed expectations, rising 35.1% year over year (YOY). It was the slowest pace of revenue growth since the final quarter of FY 2020. The company noted that starting in the fourth quarter it would report financial results for its new Facebook Reality Labs segment amid the company's increasing focus on augmented and virtual reality.
In Q2 FY 2021, Facebook reported earnings and revenue that beat consensus estimates. EPS rose 100.9% YOY, its fastest pace since the first quarter of FY 2020. Revenue grew 55.6% compared to the year-ago quarter, marking the fastest pace of growth since at least the third quarter of FY 2018. The company said in its earnings report that it expects third and fourth quarter results to decelerate significantly on a sequential basis.
Analysts expect much weaker performance in Q4 FY 2021. They expect EPS to decline 1.2% compared to the year-ago quarter, the first decline since Q2 FY 2019. Revenue is forecast to rise 19.0% YOY, the slowest pace since Q2 FY 2020. For full-year FY 2021, analysts estimate that EPS will rise 38.0%, slowing significantly from the 57.1% growth reported for FY 2020. Annual revenue is expected to expand 36.8%, which would be the fastest pace since FY 2018.
|Facebook (Meta) Key Stats|
|Estimate for Q4 FY 2021||Q4 FY 2020||Q4 FY 2019|
|Earnings Per Share ($)||3.84||3.88||2.56|
|Monthly Active Users (B)||2.9||2.8||2.5|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on Meta's MAUs, a key metric providing a measure of the size of the company's global active user base. Meta defines a MAU as a registered and logged-in user who visited Facebook through its website or a mobile device, or used its Messenger app sometime during the 30 days of the measurement period. Meta derives the majority of its revenue through selling advertising space on its social media sites and apps to marketers. The bigger its user base, the more attractive its platform is to advertisers. A bigger user base also makes it easier to attract new users as people want to be on Meta's platforms because their friends are on it, a classic example of the network effect. Another related metric is Meta's average revenue per user (ARPU), a gauge of how well the company is monetizing its user base.
Meta's MAUs have continued to grow over the past several years, but the pace has gradually slowed. In the first quarter of FY 2018, the company's MAUs grew 13.4% YOY. That pace slowed to 9.0% YOY by the final quarter of the year. By the final quarter of FY 2019, growth in MAUs had slowed to a pace of 7.6%. However, growth accelerated in FY 2020 amid the pandemic as people spent more time online while sheltering at home. In Q1 FY 2020, MAUs rose 9.6% YOY. By the end of the year, they were rising at a pace of 12.0% YOY. But the deceleration trend has resumed so far in FY 2021, with growth slowing to 9.6% YOY in the first quarter, 7.2% YOY in the second, and 6.2% YOY in the third. Analysts expect Meta's MAUs to rise 5.6% YOY in Q4 FY 2021, which would be the slowest pace out of any quarter in at least the past four years.
Visible Alpha. "Financial Data." Accessed Jan. 31, 2022.
The New York Times. "How Facebook Is Morphing Into Meta." Accessed Jan. 31, 2022.
Meta Platforms Inc. "Meta to Announce Fourth Quarter and Full Year 2021 Results." Accessed Jan. 31. 2022.
Meta Platforms Inc. "Facebook Reports Third Quarter 2021 Results." Accessed Jan. 31, 2022.
Meta Platforms Inc. "Facebook Reports Second Quarter 2021 Results." Accessed Jan. 31, 2022.
Meta Platforms Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 55. Accessed Jan. 31, 2022.