Facebook Chairman and CEO Mark Zuckerberg testifies at 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 sunk into the single digits. In the second quarter, it may not grow at all.
Though shares of Facebook parent Meta jumped about 20% in extended trading on Wednesday on better-than-expected profit, the company’s business has flatlined and doesn’t look like it will rebound at least until the second half of the year.
In its earnings report for the first quarter, Meta gave revenue guidance for the current period of $28 billion to $30 billion, trailing the $30.6 billion average analyst estimate, according to Refinitiv. At the middle of that range, revenue would drop from the second quarter of 2021, when sales came in at $29.1 billion.
The meager forecast follows 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 growing by about 50% from a big post-pandemic boom as the economy reopened.
On the earnings call on Wednesday, Meta CEO Mark Zuckerberg attributed the slowdown to both internal and macro factors.
Specific to Facebook, Zuckerberg said there’s a focus on short-term videos, which is a “drag on revenue” because they don’t monetize as well as the company’s traditional ad services. More broadly, the company is dealing with privacy changes in Apple’s iOS and “softness in e-commerce after the acceleration we saw during the pandemic.”
Like Snap and Google, Facebook is also being hit by Russia’s invasion of Ukraine.
“We’ve been blocked in Russian and we decided to stop accepting ads from Russian advertisers globally,” Zuckerberg said. “And we’ve also seen effects on business globally following the start of the war.”
Investors appear to have priced in the disappointment. As of Wednesday’s close the stock had lost almost half its value this year, spurred by a big forecast miss in February’s earnings report. Other than the profit number in this report, Facebook provided some good news, as both the daily active user figure and average revenue per user exceeded estimates.
As for a return to growth, analysts are projecting the second of the year will see expansion back into the teens.
WATCH: Facebook growing users is good but guidance is a concern
