Meta has announced its first-ever drop in revenue during an update on its financial results for the second quarter of the year, saying the ”economic downturn” is having an impact on its digital advertising business. The situation ”seems worse than it did a quarter ago,” warns chief exec Mark Zuckerberg.
Compared with the same period in 2021, the Facebook owner saw a 1% drop in overall revenue to just under $29bn. That contributed to its third quarterly drop in profits in a row for the company, which has warned about significant headwinds to its performance in the next few years.
The results release states: “We expect third quarter 2022 total revenue to be in the range of $26-28.5bn. This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty.”
It also notes that its flagship Reality Labs – the metaverse activity around which it rebranded – will deliver lower third-quarter revenue compared with Q2. To put that in perspective, in this second quarter it announced that the division had made a loss of $2.81bn. That is perhaps why the company recently announced it would increase the price of its Meta Quest 2 VR headsets by $100, despite including no new hardware features.
The Q2 update warns that it expects a slowdown in the global economy will be a drag on its activity, saying: “Foreign currency will be an approximately 6% headwind to year-over-year total revenue growth in the third quarter, based on current exchange rates.”
The company has revised its overall outlook for the year. However, with the impact of Zuckerberg’s move to reduce headcount coming into effect, it said it expected 2022 total expenses to be in the range of $85-88bn, reduced from its prior outlook of $87-92bn. The company was forced to reduce hiring plans “to account for the more challenging operating environment while continuing to direct resources toward our company priorities”.
