Meta shares plunge on weak revenue guidance even as first-quarter results top estimates

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Mark Zuckerberg, CEO, Meta Platforms, in July 2021.
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Meta will report first-quarter results after the bell Wednesday.

Here’s what analysts are expecting.

  • Earnings per share: $4.32, according to LSEG.
  • Revenue: $36.16 billion, according to LSEG.
  • Daily active users (DAUs): 2.12 billion, according to StreetAccount
  • Monthly active users (MAUs): 3.09 billion, according to StreetAccount
  • Average revenue per user (ARPU): $11.75 according to StreetAccount

Meta has been a favorite on Wall Street since early 2023, when CEO Mark Zuckerberg told investors it would be the “year of efficiency.” The stock almost tripled last year, trailing only Nvidia among members of the S&P 500, and is up another 40% in 2024.

The Facebook parent has been clawing back digital ad market share after a dismal 2022. At that time, the company was reeling from Apple’s iOS privacy update and macroeconomic concerns that led many brands to rein in spending.

Zuckerberg spearheaded an initiative to rebuild the ad business with a focus on artificial intelligence. On the company’s last earnings call in February, finance chief Susan Li said Meta has been investing in AI models that can accurately predict relevant ads for users, as well as tools that automate the ads-creation process. 

Analysts expect Meta to report a 26% increase in revenue from $28.65 billion a year earlier. That would mark the fastest rate of growth since the third quarter of 2021, which was before Apple’s privacy change started to show up on other companies’ balance sheets.

Meta is benefiting from a stabilizing economy and surge in spending from Chinese discount retailers like Temu and Shein, which have been pumping money into Facebook and company-owned Instagram in an effort to reach a wider swath of users. Analysts at Baird said in a Monday note that slower spending from China-based advertisers could be a source of concern in the first-quarter results. 

Still, the Baird analysts see continuing momentum for Meta, and said they have “reasonably high” expectations for the company because of its improving advertiser tools and success in short-form video monetization. 

Investors will remain focused on Meta’s costs, which have been central to the stock rally. Early last year, Zuckerberg said the company would be better at eliminating unnecessary projects and cracking down on bloat, which would help Meta become a “stronger and more nimble organization.” 

The company cut about 21,000 jobs in the first half of 2023, and Zuckerberg said in February of this year that hiring will be “relatively minimal compared to what we would have done historically.”

As of Dec. 31, Meta had a global workforce of 67,317, down from a peak of more than 87,000 employees in 2022, according to Securities and Exchange Commission filings.

Jefferies analysts wrote in a report last week that it’s “hard to argue with excellence.” The analysts expect Meta to beat on its first-quarter results and provide better-than-expected guidance for the second quarter. As of now, the average analyst estimate calls for revenue growth of 20% in the second quarter to $38.29 billion, according to LSEG.

“We continue to be encouraged by META’s ability to sustain double-digit rev growth, given the combination of higher engagement from AI investments, and increasing advertiser ROI & efficiency,” the Jefferies analysts wrote.

Meta’s Reality Labs unit, which houses the company’s hardware and software for development of the nascent metaverse, continues to bleed cash. Analysts expect the division to show an operating loss of $4.31 billion for the quarter, on top of the $42 billion it’s lost since the end of 2020. Revenue in the unit is projected to reach $512.5 million, a 51% increase from $339 million a year earlier.

Executives will discuss the company’s results on a call with analysts at 5 p.m. ET.

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