Facebook (Meta) Q2 2022 Earnings Report Recap

^{Source: Predictions based on analysts' consensus from Visible Alpha}

Facebook (Meta) Financial Results: Analysis

Meta Platforms, Inc. (META), formerly and commonly known as Facebook, reported disappointing Q2 FY 2022 earnings results. Diluted earnings per share (EPS) and revenue both missed analyst expectations. Diluted EPS declined by roughly 32% and revenue dropped by about 1% year-over-year (YOY). This marked the first quarter in at least three and a half years that Meta saw a YOY revenue decline. Meta's monthly active people (MAP) matched analyst predictions.

The company announced in its earnings release that, as of Nov. 1, 2022, Chief Financial Officer (CFO) David Wehner will be appointed Meta's first chief strategy officer. Susan Li, the current vice president of finance, will be promoted to CFO.

META Monthly Active People

Meta's monthly active people (MAP) rose 4% compared with the year-ago quarter to reach 3.65 billion. This represents the slowest growth in this metric in at least the past 14 quarters. MAP is a key metric that indicates the size of the company's global active user base across all its platforms. Meta defines MAP as registered and logged-in users of Facebook, Instagram, Messenger, and/or WhatsApp who have visited at least one of these products through a mobile device app, web, or mobile browser in the prior 30 days. This is distinct from the company's monthly active user (MAU) metric, which is specific to Facebook and/or Messenger.

Meta derives the majority of its revenue from 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. Historically, a bigger user base also has made it easier for Meta to attract new users, as people want to be on its platforms because their friends are on it, a classic example of the network effect.

META Outlook and Stock Performance

Meta said it expects Q3 FY 2022 revenue to be in the range of $26 billion to $28.5 billion, reflecting ongoing diminished advertising demand from the second quarter. Total expenses for the year are expected to be in the range of $85 billion to $88 billion, lowered from $87 billion to $92 billion forecast in a prior outlook announcement.

META Conference Call Recap

During a conference call with analysts after results were reported, Chief Executive Officer (CEO) Mark Zuckerberg said that Meta plans to lower its headcount over the next year as the company prepares for an expected economic slowdown. “This is a period that demands more intensity and I expect us to get more done with fewer resources,” he said.

Meta shares traded down about 0.9% in after-market trading hours July 27 following the release of the company's earnings report. The company has significantly underperformed the broader market in the last year. As of July 27, Meta had provided a 1-year trailing total return of -53.9%, well below the S&P 500's -10.9% total return.

Meta's next earnings report (for Q3 FY 2022) is estimated to be released on Nov. 2, 2022.