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Meta earnings fall short of estimates, stock moves lower

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Yahoo Finance tech editor Dan Howley breaks down Meta's third-quarter results, which were a miss on both the top and bottom line.

Video Transcript

SEANA SMITH: We have some more breaking news-- Meta out with its earnings report. Dan Howley has that for us. Dan.

DAN HOWLEY: That's right. We have a slight miss here by Meta. They came in with revenue of $28.8 billion. That's versus $28.9 billion, which was expected, and they saw earnings per share of $2.46. That's versus expectations of $2.54.

Now, what's interesting is, despite prior expectations, Facebook actually added more users than expected-- daily active users to the platform. They came in with 1.97 billion, versus 1.94 billion. But the big problem here, and the reason why you're seeing it down more than 4%, is because they whiffed on the Q3 revenue forecast.

They're expecting between $26 billion and $28.6 billion in revenue for the quarter. Wall Street, though, was looking for 30.32 billion, so nowhere near the range that Meta had put forward. This, also, by the way, comes just after the FTC announced that they're seeking an injunction against Facebook's acquisition of the company Within.

They make a virtual reality fitness app called Supernatural. They're basically saying that Facebook is trying to purchase, rather than innovate, its way into the VR space. And again, this comes against the larger backdrop of Facebook trying to get into the metaverse in VR as it tries to right the ship with its advertising revenue.

SEANA SMITH: All right, Dan. Thanks so much. Again, the stock-- off after hours, following that weaker-than-expected guidance coming for third-quarter revenue. For the latest quarter-- second quarter revenue, coming in at 28.82 billion, the estimate was for 28.93 billion.

Facebook daily active users, like Dan was just saying, actually beat 1.97 billion. We were expecting a slight drop to 1.95 billion monthly active users, though, for Facebook. 2.93 billion-- the estimate was for 2.95 billion, so a bit light there.

And Rachelle, we're also getting some news about the CFO transition and chief strategy officer appointment there, Mark Zuckerberg naming two key roles in this report. We know that this is something that the Street had been expecting for quite some time. Susan Li has now been promoted and will serve as Meta's chief financial officer. David Wehner will now take over the new role as Meta's first chief strategy officer.

RACHELLE AKUFFO: I mean, obviously, Meta has a lot going on right now. I mean, when you look at where the shares are, they've lost about 1/2 their value since the beginning of the year. A lot of investors are worried not just about the health of the core business, when you look at some of these other up-and-coming companies, when you look at the rise of TikTok, when you look at the rise of some of these other companies, but also what we're seeing with ad spending also taking a bite.

We reported earlier this year about, for the first time, Facebook Meta losing on its ad business side, a lot of investors pulling out of that side. So a lot of this not adding up to much for Meta. And then, when you think of this big, huge met-- right there in the name, Meta, betting on the metaverse-- something we've still yet to see materialize, it's understandable that we're seeing massive struggle right now. As you mentioned, look at Meta shares in after-hours. Losing about 4% there. Dave.

DAVE BRIGGS: I expected a lot worse. I mean, Seana and I were talking about a dumpster fire here this morning. I thought it would be an absolute disaster for Meta. This is not great. This is not as bad as many thought it would be-- in particular, that daily active user number-- a real surprise, given their lack of relevance today.

They are hanging on by a thread, because, of course, of Instagram keeping them in the game. But look, this is a weird time. You could call it an existential crisis for Meta, really, in terms of-- yes, you talked about the metaverse.

We're a decade away from realizing any profits from that, whatsoever. I think it's still a good bet Mark Zuckerberg is making, but it's hard to visualize. It's so far down the road.

In the meantime, it's going to be emulating TikTok-- something we'll talk about later on in the program-- but they are getting heavily criticized for the most influential people on that platform. But talk about some of the things Mark Zuckerberg said last time they reported that this is a downturn unlike he's seen in recent history, and a lot of people-- there's a bunch of people at this company that don't belong here. So expect some major layoffs coming down the road.

Let's get back to Dan Howley, our tech reporter. Dan, anything really jumped out as a big surprise to you from this earnings report?

DAN HOWLEY: Yeah, I really do think it has to do with the Facebook daily active users. That was something that we've been watching. They had seen their first decline ever a few quarters back, and that was a big blow to Facebook, the actual Facebook app itself.

And now, you notice that Facebook has been Meta-- rather, has been moving more of the emphasis to Instagramming. We'll discuss, as you said, those kind of the blowback that it's seeing as a result of not really putting itself forward as a photo-sharing app, really moving towards the ability to share videos, similar to what we're seeing with TikTok. But I think that number on Facebook is really interesting, just to see that continue to grow, though obviously, it's not by leaps and bounds that it used to be.

DAVE BRIGGS: And we really want to hear more later on, Dan, about, have they figured out those privacy changes from Apple? Still not entirely clear if they figured out how to navigate those changes in terms of the ad buy.