Social media titan Meta Platforms (NASDAQ: FB) announced its first-quarter earnings after the closing bell on Wednesday, and to the surprise of skeptical tech investors, pointed to silver linings in user growth and a depreciated impact of various macro headwinds. A climate when investors are expecting the worst might dampen sentiment, but it also means it can be easier to impress.
Tech stocks have been pounded since the start of this year, with inflation hurting lofty valuations and buyers growing concerns surrounding the conflict in Ukraine. It's been a mixed earnings bag for big tech so far, Microsoft beat expectations but Google parent Alphabet plunged after slowing ad revenue growth and a large hit from suspending activities in Russia.
FB shares are currently trading at a premarket gain of 16%; optimism regarding ‘better than feared’ profits in the face of numerous headwinds breathed life back into the downtrending share price. The company booked around $7.5B in profit in Q1. Although 21% down from the same period last year, the numbers still came ahead of Wall Street's expectation of $7.1B. As expected, revenue fell short of the Street consensus, pegged at $27.9B and up just 7% from last year.
The outlook was mixed, expecting negative trends to continue throughout the second quarter, citing the “softness” emanating from the ongoing conflict in Ukraine. Revenue estimates came in slightly lower than the analyst expectations for over $30B, with a forecast of between $28B and $30B. However, buyers were swayed with a strong forecast of lowered operating expenses, trimming earlier guidance of between $90B and $95B to between $87B and $92B.
Investors curious about the company’s metaverse endeavor didn’t seem all that displeased with the Reality Labs segment bringing in revenue of $698M on a net loss of $3B. Zuckerberg remains confident in the company’s future escapades, with spending amping up. Looking towards the family of apps that includes Instagram and WhatsApp, Meta recorded 2.87B daily active users across Q1, a 6% year-over-year increase. This was a critical metric for investors concerned over user growth, after slowing growth led to a catastrophic sell-off in the company’s previous earnings report.
Given the current situation for Meta, they have continued to weather dominant headwinds and remain positive but realistic given the challenges ahead. FB shares are currently trading at a premarket gain of 15%, still over 30% down from annually after February’s historic sell-off.
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Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.