New York (CNN Business) — Facebook is in decline.
Meta, the parent company of Facebook, reported revenue of $28.8 billion in the three months ending June, a 1% drop from the year-ago quarter and its first year-over-year revenue decline since going public. in 2012.
The company’s profits fell much faster. Net income during the quarter was down 36% year-over-year to nearly $6.7 billion, a big reversal from the prior year when its profit doubled.
The number of monthly active users on the Facebook app also slightly decreased from the first quarter of 2022, from 2.936 million to 2.934 million. In a conference call with analysts on Wednesday, Meta CEO Mark Zuckerberg said the drop was expected and attributed it “to internet shutdowns related to the war in Ukraine.”
“The number of people who use Facebook on a daily basis continues to grow,” he said.
Meta’s results follow weeks of ominous reports that the company would revert to a stricter performance review process and seek to boost worker productivity as it seeks to weather a period of slowing growth and stiff competition from newer rivals. like TikTok. Those challenges coincide with larger macroeconomic pressures, including rising inflation and recession fears.
Zuckerberg said earlier this month that the company would cut plans to hire engineers by at least 30% this year, telling employees in a question-and-answer session that “this could be one of the worst recessions we’ve ever seen.” seen in recent history,” according to a Reuters report. In its earnings report on Wednesday, the company said it “reduced our hiring and overhead growth plans this year to account for a more challenging operating environment while continuing to direct resources toward our company’s priorities.”
“A lot of teams are going to be downsized so we can shift power to other areas within the company,” Zuckerberg said on the conference call.
Still, the company’s sales slump is expected to continue into the coming quarter. Meta said it expects revenue for the current quarter to be between $26 billion and $28.5 billion. Even in the extreme case, that would mark a 1.76% decline from a year earlier.
Meta pointed to lower revenue from its virtual reality unit, Reality Labs, and continued weakness in demand for online advertising caused by economic uncertainty as factors behind the decline. Other tech companies, including Twitter and Snap, are also facing tighter ad budgets amid the economic downturn.
Shares of Meta fell as much as 5% in after-hours trading on Wednesday after the earnings report before recovering somewhat.
Hours before the earnings report dropped, the FTC blocked Meta’s acquisition of virtual reality company Within, claiming the tech giant is attempting to illegally grow its “virtual reality empire.” While Meta called the court order “incorrect in fact and law,” it highlights the potential regulatory hurdles the company faces in growing its VR business.
The stakes are high for the company with that particular division. Meta has staked its future on a still largely hypothetical version of the internet called the “metaverse” that is based on virtual and augmented reality technologies.
“The social media company faces several challenges in the coming months, primarily a slowdown in revenue growth due to reduced ad spend, as well as a lack of innovation and the introduction of new user-friendly features,” said Jesse Cohen, a senior analyst at Investing.com. in a note to investors after the earnings report. On top of that, Cohen said, investors also “need to be concerned about the negative impact of possible regulatory actions by the US government.”
Meta also announced a change to its C-Suite this Wednesday. Chief Financial Officer Dave Wehner will become Meta’s first chief strategy officer on November 1, responsible for “the company’s strategy and corporate development.” Meta’s current vice president of finance, Susan Li, will take over as chief financial officer.