Meta reports first drop in revenue and 36% drop in profits

SAN FRANCISCO — For years, Facebook sales grew flawlessly and continued to grow, defying the laws of gravity even as the company was rocked by privacy and misinformation scandals.

Wednesday, Meta, the company formerly known as Facebook, announced a 1% decline in quarterly revenue from the prior year. It was the first time the social media giant's revenue has shrunk since its IPO a decade ago as it faced increased regulatory scrutiny and a turbulent economy while trying to build a new frontier. of digital communication.

Meta's second-quarter revenue was $28.82 billion, compared to $29.07 billion a year earlier. early. Profit was $6.69 billion, down 36% from a year earlier. Wall Street analysts had predicted profits of $7.04 billion on revenue of $28.9 billion, according to data compiled by FactSet.

The results made a tough day worse for Meta, which was also sued Wednesday by the Federal Trade Commission over a deal to buy a virtual reality company called Within. The lawsuit struck directly at the ambitions of Mark Zuckerberg, founder and CEO of Meta, who has spent billions of dollars to create an immersive world of social interaction in the "metaverse," which is a combination of virtual and augmented realities that will be linked by online commerce and relationships.

Meta's revenue decline was particularly steep given that in 2019 its quarterly revenue growth was 28%. The company attributed its recent lackluster financial results to weaker demand for digital advertising and broader economic uncertainty.

"We appear to have entered an economic downturn which will have a broad impact on the digital advertising industry," Zuckerberg said on an earnings call. "Things look worse than a quarter ago."

Google, Twitter and Snap, which rely on online advertising, also said this month that they had experienced a drop in demand for advertising due to the slowing economy Some of the companies cited the effects of the war in Ukraine and its destabilizing effect on the European advertising market, as well as the strength of the US dollar, which hurt the companies in terms of global sales.

This pain is unlikely to end soon t. For the current quarter, Meta said it expects "a continuation of the weak advertising demand environment." E-commerce ads were declining as the "peak of the pandemic" passed and more people ventured outdoors, the company said, adding that tough times like these were historically " cyclical".

Mr. Zuckerberg, who has cut spending and reduced the benefits of his company, said he expected to "do more with less resources". But he noted that he plans to continue investing in key areas that will prepare Meta for its next phase of growth.

Beyond the economic tumult, Meta is doing faced with its own particular set of challenges. Last year, Apple made privacy-related changes that impeded Meta's ability to measure and serve its advertising on Apple-manufactured mobile devices. (Meta derives the vast majority of its advertising revenue from smartphones...