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Facebook forecast points to possible drop in revenue for the first time

Facebook Chairman and CEO Mark Zuckerberg testifies during a House Financial Services Committee hearing in Washington, October 23, 2019.

Erin Scott | Reuters

Prior to the first quarter of this year, Facebook’s revenue growth had never hit the numbers. In the second trimester, it may not grow at all.

Although shares of Facebook parent Meta jumped about 20% in extended trading on Wednesday on better-than-expected earnings, the company’s business has stalled and doesn’t appear to rebound until at least the second half. of the year.

In its first-quarter earnings report, Meta gave a current-period revenue forecast of $28 billion to $30 billion, trailing analysts’ average estimate of $30.6 billion, according to Refinitiv. In the middle of that range, revenue would fall from the second quarter of 2021, when sales were $29.1 billion.

The meager forecast follows year-over-year growth of just 7% in the first quarter, the slowest pace of expansion in Facebook’s 10-year history as a public company. A year ago at this time, Facebook was up around 50% after a big post-pandemic boom as the economy reopened.

During Wednesday’s earnings call, Meta CEO Mark Zuckerberg attributed the slowdown to internal and macroeconomic factors.

Specific to Facebook, Zuckerberg said the focus is on short-term videos, which “hampers revenue” because they don’t monetize as well as his traditional ad services. More broadly, the company is dealing with privacy changes in Apple’s iOS and “the softness of e-commerce after the acceleration we’ve seen during the pandemic.”

Like Snap and Google, Facebook is also affected by Russia’s invasion of Ukraine.

“We have been blocked in Russia and have decided to no longer accept ads from Russian advertisers globally,” Zuckerberg said. “And we also saw effects on businesses globally after the war started.”

Investors seem to have priced in the disappointment. As of Wednesday’s close, the stock had lost nearly half its value this year, boosted by a big forecasting error in the February earnings report.

But Facebook provided some good news to go along with its profit figure in the report: the number of daily active users and average revenue per user exceeded estimates.

As for a return to growth, analysts predict that the second half of the year will see an expansion into adolescence.

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