What to expect in the Meta earnings report?

Facebook owner Metaplatforms (META) will report quarterly results that should provide a clearer picture of ad spend, the main source of revenue for all social media companies. The Meta earnings report arrives late Wednesday.




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The lack of clarity about ad spend is one reason why Meta shares and those of other social media companies have fallen over the past year. This includes snap (SNAP), Etsy (ETSY) and Pinterest (PINS).

After Friday’s quarterly report, Snap saw its shares plummet. It missed estimates due to a weak advertising market. The Snapchat parent also declined to provide guidance for the third quarter. In addition, Snap said it will “significantly slow our hiring rate, as well as operating cost growth.”

Snap shares crashed 39% on Friday, while Meta shares fell 7.6% that day. Meta-share rose 3% to 164.10 in morning trading in the stock market today.

Costly shift to the metaverse

Meta is undergoing a major and costly shift from social networks to the metaverse. It faces several other challenges that are likely to worry analysts when the Meta earnings report is published.

For example, Meta continues to see revenue declines due to: Apple (AAPL) changes its iPhone operating system to reduce ad tracking. It also faces increasing competition from TikTok and remains under pressure over antitrust allegations by Congress.

At the same time, ad spend decisions continue to fluctuate. Many small and medium-sized businesses are considering new channels outside of Meta for the first time.

“Meta faces a difficult economic environment and a daunting geopolitical landscape,” Monness Crespi Hardt analyst Brian White wrote in a note to clients. “Given the sensitivity of advertising campaigns to the turmoil of the economy, we expect that digital advertising spending will come under severe pressure.”

What analysts expect from meta-revenue

Analysts expect Facebook to report adjusted earnings of $2.54 per share, down 30% from the same quarter a year ago. That is the fourth consecutive quarter of declining profits. Estimated revenue is $28.9 billion, slightly down from $29.1 billion a year ago.

To maintain profits, Meta has cut operating costs.

In late June, several media outlets reported that Meta had warned employees to brace for a tough second half as it copes with pressure on its core advertising business. Chief Executive Mark Zuckerberg said he is anticipating one of the worst recessions in recent history.

In a separate memo leaked to the press, Chief Product Officer Chris Cox said Meta should work flawlessly in a slower-growth environment.

Meta-shares are down 22% since it reported its first quarter results.

Bank of America analyst Justin Post wrote that potential positives about the second quarter conference call “could include more stability than expected in the third quarter outlook, optimism about Reels monetization, ad targeting progress since Q1 and evidence of delaying Metaverse releases.” .”

Follow Brian Deagon on Twitter at: @IBD_BDeagon for more information on technology stocks, analysis and financial markets.

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