Mark Zuckerberg, the founder of Meta, appears to have reminded himself that income statements matter when you’re a public firm – especially to shareholders.
After shocking investors in early February by announcing $90-$95 billion in expense spending this year as the social media behemoth builds out Zuck’s futuristic metaverse, the company is backtracking on that target as top line growth slows.
The new target is $87-$92 billion, which represents a greater commitment to safeguard profit margins.
“These investments will be critical for our long-term success and growth,” Zuckerberg told jittery Wall Street analysts on a Wednesday earnings call. “We should, in my opinion, see them through to the end. However, in light of our present business growth, we are considering slowing the pace of certain of our investments. From a financial standpoint, our goal over the next few years is to develop operating income from Family of Apps to fund the expansion of investment in Reality Labs while maintaining overall profitability. Unfortunately, due to revenue headwinds, that will not be possible in 2022.”
Zuck’s expenditure mea culpa was well received by investors, as shares jumped 16 percent in pre-market trading on Thursday.
Mark Zuckerberg, co-founder and CEO of Facebook, speaks during an Oculus developers conference in San Jose, California on October 6, 2016, while wearing a virtual reality headset. (Photo credit should read GLENN CHAPMAN/AFP through Getty Images instead of GLENN CHAPMAN/AFP via Getty Images.) )
The spending cut comes after a mixed quarter for Meta, in which the company recovered from a bad fourth quarter but still wasn’t growing at the same rate as in the past. Here’s how Meta fared against Wall Street expectations in the first quarter:
$27.9 billion in revenue versus $28.24 billion projected
$2.72 adjusted EPS vs. $2.56 projected
$27 billion in ad sales against $27.48 billion predicted
Meta stated that it had increased its user base across the board. The number of daily active users climbed by 4% to 1.96 billion. The company’s primary Facebook app lost 1 million daily active users last quarter.
In a new letter to clients, Jefferies analyst Brent Thill wrote, “Perhaps the largest Q1 surprise was the $3 billion fall in the FY22 overall expense guidance to $87-92 billion.” “We were especially heartened to learn that management is focused on ‘increasing overall profitability’ while still backing Reality Labs expansion. This statement, we feel, is a clear indication that the long-term operating margin may remain greater than previously anticipated.”
Add Comment