Apr 27, 2022 - Economy

Meta shares soar following Q1 earnings beat

Photo by Nikolas Kokovlis/NurPhoto via Getty Images

Shares for Meta, Facebook's parent company, jumped more than 12% in after-hours trading on Wednesday after beating Wall Street expectations on earnings, despite macroeconomic factors that have dogged the ad market.

Yes, but: The company missed revenue expectations, bringing in $27.9 billion compared to the $28.2 billion that was expected. CEO Mark Zuckerberg also told investors that the company will need to be more disciplined about investments moving forward, given slowed revenue growth compared to the pandemic. 

  • Given current growth levels, Zuckerberg said, "we are now planning to slow the pace of some our investments." He said the company would focus on growing revenue from its core business, social media and messaging, to help fuel investments in its virtual reality technologies moving forward.

Why it matters: The news follows a brutal fourth quarter earnings report, which saw the Facebook app lose roughly 1 million daily active users — its first ever user drop.

  • The company only slightly exceeded daily active user expectations in the first quarter of 2022.

Details: Overall, revenue growth for Meta is slowing compared to the height of the pandemic, but the company continues to be very profitable.

  • The social media giant ended last quarter with an operating margin of 31%, down from 43% during Q1 2021. It continues to invest heavily in its Reality Labs segment, which includes its virtual reality technologies and hardware.
  • Revenue from Meta's Reality Labs segment grew to $695 million, up from $534 million Q1 2021, despite losing more money last quarter — $2.96 billion — compared to the first quarter of 2021.

By the numbers, via CNBC:

  • Earnings per share: $2.72 vs $2.56 expected, according to a Refinitiv survey of analysts
  • Revenue: $27.91 billion vs $28.2 billion expected, according to Refinitiv
  • Daily Active Users (DAUs): 1.96 billion vs 1.95 billion expected, according to StreetAccount
  • Monthly Active Users (MAUs): 2.94 billion vs 2.97 billion expected, according to StreetAccount
  • Average Revenue per User (ARPU): $9.50 expected, according to StreetAccount

The big picture: Inflation and the war in Ukraine had investors on edge heading into this quarter's earnings period.

  • Shares for Google parent Alphabet dropped around 3% earlier this week, in part due to weaker-than-expected advertising revenue growth at YouTube, which was attributed to the ongoing conflict.

What's next: For the second quarter, Facebook said it expects $28-30 billion in revenue, an outlook that 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."

Go deeper ... Meta's earnings over the past year:

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