meta, the social giant formerly known as Facebook, beat Wall Street estimates for earnings in the first quarter of 2022 — but fell short on the revenue front, as it reported its slowest top-line growth as a public company.
For Q1, meta reported revenue of $27.9 billion, up 7% year over year, after the company has consistently seen double-digit growth ever since its 2012 IPO. It posted net income of $7.47 billion, or $2.72 per share, down 21% compared with the year-ago period.
The company said it expects second quarter 2022 total revenue to be in the range of $28 billion-$30 billion — which would be -2% to +5% compared with $28.6 billion in Q2 2021. The outlook “reflects a continuation of the trends impacting revenue growth in the first quarter, including softness in the back half of the first quarter that coincided with the war in Ukraine.”
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Facebook daily active users averaged 1.96 billion for March 2022, up 4% year-over-year, and up slightly from the prior quarter (1.93 billion). In Q2, the company expects a sequential decline in Facebook monthly average users across Europe after Russia banned Facebook (and Instagram) in March.
Wall Street analyst consensus estimates were for meta to post Q1 revenue of $28.2 billion in EPS of $2.56 per share, according to financial data provider Refinitiv. meta was expected to report 1.95 billion daily users for the quarter, per StreetAccount.
Shares of meta popped 18% in after-hours trading on the bottom-line beat and the disclosure that Facebook eked out a small gain in average DAUs. Through Thursday, the stock was down 48% year to date — a slide that included its historic loss of $230 billion in market cap — so investors were pleased with the less-than-disastrous Q1 earnings report.
meta had previously warned that in Q1 it was facing “continued headwinds” from increased competition for people’s time — with CEO Mark Zuckerberg calling out TikTok — as well as from Apple’s iOS data-privacy changes and “regulatory changes.”
“We made progress this quarter across a number of key company priorities and we remain confident in the long-term opportunities and growth that our product roadmap will unlock,” Zuckerberg said in announcing the results. “More people use our services today than ever before, and I’m proud of how our products are serving people around the world.”
On Instagram, Reels — meta’s copycat of TikTok — today represents more than 20% of time spent on the app, Zuckerberg said. But it’s still early days in terms of generating revenue from that short-form video consumption, CFO Dave Wehner said on the earnings call.
Zuckerberg told analysts that “with our current business-growth levels, we are now planning to slow the pace of some of our investments,” including in AI infrastructure and Reality Labs, which is the company’s recently formed segment that encompasses its AR and VR businesses.
For Q1, Reality Labs again was a drag on meta’s earnings. Reality Labs revenue came in at $695 million, up 30%, with an operating loss of $2.96 billion (compared with a $1.83 billion operating loss in Q1 2021).
Companywide, meta showed stronger user growth than the standalone numbers for the flagship Facebook app. The company’s tally of total “daily active people” — which includes Facebook, Instagram, Messenger and WhatsApp — was 2.87 billion on average for March 2022, up 6% year-over-year (and up about 50 million from 2.82 billion in Q4).
