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Meta Stock Tumbles on Weak Earnings and a Disappointing Outlook

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This quarter’s earnings will be the first since Facebook became Meta Platforms.
Nick Otto/Bloomberg

Shares of Meta Platforms were tumbling in extended trading Wednesday after the Facebook parent reported weaker than expected fourth-quarter results. The company’s first-quarter outlook was also well below expectations.

Meta (ticker: FB) reported net income of $10.29 billion, or $3.67 a share. Total revenue rose 20% year-over-year to $33.67 billion. Analysts polled by FactSet had forecast earnings of $3.85 a share and revenue of $33.4 billion.

The company said it now expects first-quarter revenue to be in a range of $27 billion to $29 billion, representing growth of 3% to 11%. Wall Street has been expecting first quarter revenue of $30.2 billion.

Meta cited headwinds including privacy changes to Apple ‘s iOS mobile software, which has made tracking users more difficult.

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Meta shares were down more than 20% in after-hours trading immediately following the report. The pain bled to social media peers, with shares of Snap (SNAP) and Twitter (TWTR) dropping 19% and 7.8%, respectively.

It’s the first earnings report from Facebook since it became Meta Platforms . The company has already said it will invest billions of dollars in its metaverse endeavors, but the stock’s reaction showed why the Facebook and Instagram apps are still the focus for investors.

The family of apps segment, which includes Facebook, Instagram, Messenger, and WhatsApp, reported operating income of $15.9 billion during the quarter. The “metaverse” focused reality labs segment, which includes virtual reality and augmented reality endeavors, reported an operating loss of $3.3 billion.

Days after the company’s third-quarter report in October, CEO Mark Zuckerberg unveiled the rebrand to Meta Platforms. The move refocuses the company around Zuckerberg’s vision of the metaverse—a next evolution of the internet that involves always-online interactive virtual worlds. Since that announcement, a stream of metaverse mentions hit earnings calls and analyst notes. According to earnings call transcripts tracked by Sentieo, the term metaverse was mentioned in 224 calls in 2021, up from seven in 2020.

Of course, Facebook’s rebrand came as the company faced weeks of scrutiny related to leaked internal documents and data that whistleblower Frances Haugen submitted to lawmakers, regulators, and journalists. The Wall Street Journal, which first reported on the documents, describes the central finding of its Facebook Files series that Facebook knows its platforms are riddled with flaws that cause harm, “often in ways only the company fully understands.”

Whether the rebrand wins over Wall Street over the long term remains to be seen. Prior to the report, the stock was up 2.2% since Oct. 27, which was the day prior to the Meta announcement. Meanwhile, lawmakers have called for stricter regulations. Still, 41 of the 53 analysts covering the stock rate it at Buy or the equivalent, according to FactSet.

Write to Connor Smith at connor.smith@barrons.com

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