Meta prepares to report earnings amid ad revenue and cost-cutting pressures

Meta prepares to report earnings amid ad revenue and cost-cutting pressures

Meta (META) is preparing to release its third quarter results after the closing bell on Wednesday.

Here’s what Wall Street expects from Facebook’s parent company, compiled by Bloomberg:

Revenue: $27.4 billion expected

Earnings per share (EPS): $1.88 expected

Facebook Daily Active Users (DAUs): 1.86 billion expected

Slowing digital advertising was a priority for Meta and Big Tech overall ahead of this week’s results. On Tuesday, Google’s parent company Alphabet (GOOG, GOOGL) reported a substantial loss of ad revenue on YouTube. Meta is coming off a tough second quarter as the company failed to meet analysts’ expectations for both earnings per share and revenue. These weren’t just any failures, but they matched the tech giant’s first ever drop in revenue.

Things haven’t improved much since then. Meta Connect, the company’s annual flagship event, set a direction for Meta that included corporate partnerships with Microsoft (MSFT) and Accenture (ACN). Wall Street is not yet convinced, it seems. Atlantic Equities even downgraded the company this month and a decline in shares followed.

AUSTIN, TEXAS – MARCH 15: Mark Zuckerberg, via video, speaks at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference & Festivals at the Austin Convention Center on March 15, 2022 in Austin, Texas.  (Photo by Samantha Burkardt/Getty Images for SXSW)

AUSTIN, TEXAS – MARCH 15: Mark Zuckerberg, via video, speaks at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference & Festivals at the Austin Convention Center on March 15, 2022 in Austin, Texas. (Photo by Samantha Burkardt/Getty Images for SXSW)

So what are analysts looking for? Some worry about daily active users, fearing that the growth will slow down. The company’s advertising business also remains under severe pressure, not only due to major competition from TikTok, but following privacy changes from Apple (AAPL). The redesign, called App Tracking Transparency, is expected to slash Meta’s revenue by $10 billion this year alone.

Meta is down about 58% year-to-date as of Tuesday’s market close.

“Meta needs to get its mojo back”

It’s a tense moment on all levels for Meta. Ex-COO Sheryl Sandberg left the company for good just weeks ago, while Meta cut costs trying to manage its pivot to virtual reality and metaverse apps. This week, Altimeter Capital shareholder Brad Gerstner sent a scathing open letter to Meta CEO Mark Zuckerberg criticizing the extent to which the company has gone all-in on its investment in the Metaverse.

“Meta’s investment in the metaverse…has attracted the most attention and led to much confusion,” Gerstner wrote on October 24. “Perhaps it was the company name change to Meta that led the world to conclude that you were spending 100% of your time in Reality Labs rather than AI or the core business. whatever the reason, it is certainly the perception.”

There are a few possible bright spots on the horizon. For example, the Meta Quest Pro is now available, which the company touts as its best – and most expensive – VR headset to date. Gerstner also expressed optimism about Meta’s social media activities.

“Meta’s core business is one of the largest and most profitable in the world with over $45 billion in operating profits last year alone,” he said. “Additionally, Meta has leading capabilities in key future technologies such as artificial intelligence and immersive 3D that will help drive new products and future growth.”

Nonetheless, the skepticism surrounding Meta, both from Wall Street and investors, has long been on the rise.

“Meta needs to get its mojo back,” Gerstner wrote. “Meta needs to rebuild trust with investors, employees, and the tech community in order to attract, inspire, and retain the best people in the world. In short, Meta needs to get fit and focused.”

Allie Garfinkle is a senior technical reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.

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