Meta reports its second quarterly revenue decline and hints at cost-cutting efforts

New York
CNN business

Meta on Wednesday posted its second-ever quarterly revenue decline since going public and warned it is making “significant changes” to cut costs before 2023 as it battles an economic downturn hitting the major online advertising business.

In the three months ended September, Meta ( FB ) reported revenue of $27.7 billion, down 4% year-over-year and slightly above Wall Street analysts’ expectations. Facebook parent the company reported its first quarterly revenue decline in June.

The company earned nearly $4.4 billion less than half of the amount made in the same period of the previous year and below analysts’ forecasts.

“We’re approaching 2023 with a focus on priorities and efficiency that will help us navigate the current environment and build an even stronger company,” Meta founder and CEO Mark Zuckerberg said in a statement.

Meta’s stock fell 12% in after-hours trading on Wednesday after the results.

Demand for online advertising has fallen in recent months amid rising inflation and fears of a recession. Tech companies like Google and Snap have also seen success in their ad revenue.

At the same time, Meta’s user growth is slowing amid increased competition from rivals like TikTok. Meta reported 2.96 billion monthly active users on its flagship Facebook app at the end of the quarter, up 2% year over year. It is lower than the 6% growth rate it had in the last quarter. Daily active users of Meta’s family of apps grew 4% to 2.93 billion, up from an 11% increase posted the year before.

These challenges to the core business will feed into an ambitious new bet Meta is pouring billions of dollars into building a future version of the internet called the metaverse, which is likely years away.

Meta CFO David Wehner said operating losses for the company’s metaverse ventures, which are classified under its Reality Labs unit, will “grow significantly year over year” in 2023. Reality Labs lost nearly $3.7 billion in the September quarter, costing the company $9.4 billion this year.

Altimeter Capital, a Meta shareholder, wrote an open letter last week calling on the company to cut its employee expenses by at least 20% and reduce annual capital spending by at least $5 trillion and cap its investment in the metaverse. 5 billion dollars a year.

In Wednesday’s report, Wehner said the company is “making important changes to operate more efficiently.” He added that the company’s headcount by the end of 2023 will roughly match the 87,314 it reported at the end of September (a 28% increase over the previous year).

“We are maintaining some teams in terms of headcount, cutting others and investing headcount growth only in our highest priorities,” Wehner said. He also indicated that the company could shrink its physical office footprint.