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Meta Platforms’ Revenue Decline Is Expected to Accelerate


Facebook parent

Meta Platforms Inc.

META 6.01%

is expected to show continued struggles to push through challenging business conditions that have combined to shave more than half a trillion dollars from its market value so far this year.

Because of the tough macroeconomic climate, growing competition from rival TikTok and the fallout from

Apple Inc.’s

ad-tracking changes, analysts predict Meta will post its second revenue decline in a row when its earnings are released after markets close Wednesday.

The company is expected to report quarterly revenue of $27.5 billion, according to analysts surveyed by FactSet. That figure would be down more than 5% compared with a year earlier, after posting a 1% decrease last quarter.

Meta’s Reality Labs unit, which is central to the company’s ambitious plans to build out the metaverse, is expected to show a revenue decline rather than growth. The division, which produces virtual-reality hardware among other things, is expected to post revenue of $426 million for the quarter, according to FactSet, which would be a decline of 23.7% compared with a year earlier.

Analysts predict Meta will post a net profit of $5.2 billion for the third quarter. That would represent the fourth quarter in a row that the company’s bottom line has fallen, something Meta hasn’t experienced since the fourth quarter of 2012.

Investors will be looking for any signs that Meta has begun to minimize the impact on its business of ad-tracking changes introduced by


last year. Meta warned in February that those changes would cost the company some $10 billion in 2022.

For the quarter, advertising is expected to represent 97.8% of Meta’s revenue, according to analysts surveyed by FactSet. Analysts predict Meta’s ad revenue will fall to $26.9 billion, down nearly 5% compared with a year prior.

Meta is also grappling with a digital-advertising market in upheaval from surging inflation and other factors, including the war in Ukraine, which are causing a slowdown in ad spending.

“It’s a tough time to be a big social-media company right now,” said

Debra Aho Williamson,

principal analyst at Insider Intelligence. “You’re facing a lot of pressures on revenue, usage and the worsening economy on top of it.”

Fellow digital-ad giant Google on Tuesday reported its fifth consecutive quarter of slowing sales growth, with its core YouTube and search properties showing surprising weakness.

Snap Inc.

reported last week its weakest-ever quarterly sales growth and warned investors that it was operating on an assumption of no revenue growth this quarter from the year-ago period.

Before Wednesday, Meta’s shares had fallen nearly 60% and it had lost more than $550 billion in market value in 2022.

In its efforts to combat TikTok, Meta has given priority to the development and growth of Reels, its short-form video format on Facebook and Instagram. Meta has also been focused on its building of the metaverse, and earlier this month, the company unveiled the $1,500 Meta Quest Pro, its most advanced virtual-reality headset to date.


What is your outlook on Meta? Join the conversation below.

Internal company documents viewed by The Wall Street Journal indicate that both efforts are off to rough starts.

Instagram users are cumulatively spending 17.6 million hours a day watching Reels, less than one-tenth of the 197.8 million hours TikTok users spend each day on that platform, according to one of the documents.

Meanwhile, Horizon Worlds, Meta’s flagship metaverse product for consumers, has fewer than 200,000 monthly active users, less than the company’s original goal of 500,000 users by the end of this year, a goal that has been revised to 280,000, according to company documents.

One area in which Meta might be able to display promise is in Facebook’s user base. Analysts surveyed by FactSet expect that the company might disclose that Facebook’s daily active user base has continued growing and has increased to 1.98 billion users, up from 1.97 billion three months ago.

Write to Salvador Rodriguez at [email protected]

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