Meta Q1 Earnings Likely Dropped 28%

Ad revenue drags down profit as company braces for third round of layoffs

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Meta Platfroms Inc. (META), the parent company of Facebook and WhatsApp, will probably say first-quarter profit sank 28% as advertising revenue sagged and the company braces for another round of layoffs in May.

Key Takeaways

  • Meta Platforms expected to post revenue of $27.7 billion and diluted EPS of $2.01.
  • The company has braced its staff to expect further job cuts.
  • Analysts see big tech layoffs as a sign of slowing ad revenue.

The Menlo Park, California-based firm is expected to report net income of $5.3 billion, or $2.01 per diluted share, from $7.4 billion a year ago. Revenue from its Family of Apps and Reality Labs segments are likely to remain flat at $27.7 billion, according to data from Visible Alpha. The company will release its earnings on Wednesday, April 26.

Meta rebranded in November 2021 from Facebook as the company pivoted to target the virtual world of the metaverse,.a business that's been slow to find traction. The Wall Street Journal reported last year that the company cut its target 500,000 monthly active users to 280,000.

Analysts aren't optimistic about Big Tech this earnings season as job cuts loom. Meta eliminated 11,000 jobs last November and another 10,000 last week. Bloomberg said the company has already braced staffers for another round of layoffs in May

 "Expectations are low," said Tom Forte analyst at D.A. Davidson told Yahoo Finance. "If they are laying off people, especially late in the quarter, that suggests that the macroeconomic challenges are getting more difficult. When you couple in the mini-financial crisis in banking and Roku and Pinterest layoffs, that suggests that digital advertising may have taken a step backward in the March quarter."

Meta stock opened the year at 122.82 and rallied more than 73% to $213, outperforming the nearly 20% rally in the S&P500 Communication Services sector.

meta vs S&P 500 Communications sector Q1 performance


The Key Metric

The key metric for Meta is Monthly Active User (MAU) data for Facebook. In the first quarter of 2022, Facebook reported MAUs of 2.34 billion, with analysts expecting 2.99 billion users this quarter. A large user base is the key to Facebook’s main revenue driver, advertiser spending.

Article Sources
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  1. Visible Alpha. "Financial Data".

  2. Meta. "Meta to Announce Q1 2023 results".

  3. Meta. "Introducing Meta: A Social Technology Company."

  4. WSJ. "Metaverse Underperforming for Meta."

  5. Meta. "Mark Zuckerberg’s Message to Meta Employees."

  6. Meta. "Update on Meta’s Year of Efficiency."

  7. Bloomberg. "Meta Prepares for More Layoffs."

  8. Yahoo Finance. "Lyft Layoffs Very Consistent with Big Tech."

  9. S&P500. "Communication Services Index".

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