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Facebook’s social network added more users than projected in the first quarter, potentially staving off concerns that the company is losing momentum as a new generation flocks to younger sites like TikTok.
Shares surged more than 16 per cent in late trading after Facebook parent company Meta Platforms reported 1.96 billion daily users for its flagship platform, a return to growth after the first-ever decline in the December quarter. Analysts had estimated 1.94 billion.
Facebook parent Meta’s share gained after it added more users than expected to the social network.Credit:Bloomberg
Revenue for the period jumped 6.6 per cent to $US27.9 billion ($39.2 billion), and would have been higher if not for the war in Ukraine, the company said. The stock had dropped almost 50 per cent this year as investors became increasingly worried that Meta’s main business and profit engine -- advertising in its social media feeds -- was losing steam.
Those concerns appear to have been put to rest -- at least for now -- given Facebook added 31 million new daily active users in the recent quarter. Still, many of Meta’s challenges remain. Chief Executive Officer Mark Zuckerberg has acknowledged that video-sharing app TikTok, owned by China’s ByteDance, is providing serious competition for young users’ attention.
Meanwhile, changes to data-collection rules on Apple’s iPhones have hindered Meta’s ability to serve users targeted ads. Last quarter, Meta executives said the privacy changes would reduce the company’s 2022 sales by $US10 billion. Advertisers have also been spending less due to issues with supply chains, inflation and the ongoing war in Ukraine, Meta executives said.
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A prolonged slowdown would make it tougher for the company to justify Zuckerberg’s expensive, virtual-reality-fuelled vision of the metaverse, a business that won’t bring in profit for years -- if ever. Meta said that in light of the revenue outlook, it is paring its spending plans for the year, to $US87 billion to $US92 billion from a previous target of as much as $US95 billion.
Sales in the current period will be $US28 billion to $US30 billion, Meta said in a statement after the close of US markets, compared with the $US30.7 billion analysts had predicted on average. Again, the company pointed to the ongoing war in Ukraine as a factor.
“This outlook reflects a continuation of the trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine,” the company said in the statement.