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Facebook Parent Meta Stock Falls 20% After Reporting Stagnant User Growth

Monthly users on platform remains at 2.91 million

Facebook parent company Meta met revenue expectations but missed EPS projections in its Q4 earnings on Wednesday.

Shares in Meta began dropping in after-hours trading after the company reported weak earnings results, with the price plunging from $327.82 at opening to around $256.20 in the afternoon.

The social giant’s quarterly revenue came in at $33.67 billion, meeting analyst expectations of $33.41 billion. The company, which rebranded as Meta last October, reported a revenue of $29 billion last quarter, which was on par with analyst expectations last year. After seeing a pandemic boost in online activity throughout 2020, its revenue and earnings growth is beginning to slow down.

“We had a solid quarter as people turned to our products to stay connected and businesses continued to use our services to grow,” CEO Mark Zuckerberg said in a statement. “I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse.”

Meta’s earnings per share was $3.67, lower than projections of $3.84 for this quarter. Analysts previously estimated an EPS of $3.88 in Q4 2020.

User growth on Facebook this quarter was stagnant at 2.91 million monthly active users, compared to 2.9 million users reported last quarter — representing only an increase of 4% year-over-year. The platform’s daily active users declined from the previous quarter for the first time, dropping from 1.930 billion to 1.929 billion globally. Meta counts a monthly active user as someone who is registered and logged in to visit Facebook or its Messenger app during the 30-day period.

Analysts expected to see some growth on monthly users, but at less than half the pace compared to Q4 a year ago as the social platforms face growing competition from Snap, TikTok, YouTube and others. Even as Meta aims to shift focus to augmented and virtual reality products, most of its revenue still comes from selling ads on its social apps.

In a call with investors, Zuckerberg acknowledged the impact on business due to the “competitive marketplace” and named TikTok as a major challenger. “People have a lot of choices for how they want to spend their time,” he said, which is why the company is focusing more on Instagram Reels, its short-form video clone of TikTok. Zuckerberg also said regulation in Europe and Apple’s privacy changes have impacted its personalized ads business.

This was also the first time the company started separate reporting on revenue and income from operations, breaking out the family of apps, covering Facebook, Instagram, Messenger and WhatsApp services, and Reality Labs, which includes its AR and VR products. Its Reality Labs division generated $877 million in revenue but lost $3.3 billion this quarter.

Overall, Meta’s Q4 results are weak in comparison to other tech giants that have been rebounding on Wall Street after seeing dips over the last month. Last week, Microsoft and Apple reported strong earnings results and have set a positive tone so far, despite ongoing workforce and supply chain issues. Google parent Alphabet also reported a stellar quarter in terms of revenue growth this week as it continues to dominate in ad and cloud services.

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