Meta, owner of Facebook, has first quarterly drop in revenue

Meta, which owns Facebook, reported its first annual revenue decline in the second quarter of this year, blaming macroeconomic pressures. The company also presented investors with a bleak outlook for the coming months, with a revenue projection below estimates.

The company is the latest major online advertising player to wither as advertisers slash their spending. On Wednesday, the company said revenue for the April-June period was $28.82 billion, down 1% from the same period in 2021.

Analysts had expected $28.92 billion, according to data compiled by FactSet.

Meta’s net income dropped to $6.69 billion from $10.39 billion last year. Wall Street was projecting a profit of about $7 billion.

The company said it expects revenue for the current quarter to be between $26 billion and $28.5 billion, down from the $30.4 billion expected by analysts, according to data from S&P Capital IQ.

“This outlook reflects the continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty,” said Meta’s CFO David Wehner.

The company’s shares were down about 3% in aftermarket trading.

Meta founder and chief executive Mark Zuckerberg also announced his succession plan for Sheryl Sandberg, who is due to leave the company this year after spending 14 years as chief operating officer.

Wehner, a ten-year veteran of Meta, will assume the newly created role of chief strategy officer. Susan Li, who has been with the company for 14 years, will be promoted to CFO.

Zuckerberg said he had been “working for a few years” on the reorganization, which splits Sandberg’s responsibilities across multiple roles.

Earlier this year, Zuckerberg sought to reassure investors that entry costs into new lines of business would be kept in check, but warned that revenues are likely to continue to register “softness” for the remainder of this volatile year.

Meta’s results coincided with a trend of underperformance among the big players in online advertising — the business model that underpins much of the internet economy.

Shares in Snap, the owner of Snapchat, have tumbled about 25% last week after its earnings missed analysts’ targets. The company said advertisers were cutting spending.

Twitter also saw revenue decline, down 1%, when Wall Street had expected growth of 11%.

The biggest online ad player, Alphabet, the parent of Google, on Tuesday blamed a pullback in ad spending after YouTube’s revenues fell short of expectations. Alphabet’s overall revenue is growing at the slowest pace in two years. However, shares of the search group rose 8% on Wednesday, with its performance generally better than analysts had expected.

Emerging in the ad sector, Amazon will release its second quarter results on Thursday (28). The company’s advertising business — which includes sponsored products in its store but also video-on-demand ads — is expected to command about 15% of the overall online ad market next year, according to Insider Intelligence.