^{Source: Predictions based on analysts’ consensus from Visible Alpha}

Facebook (Meta) Financial Results: Analysis

Facebook, which was renamed Meta Platforms, Inc. (FB) in late October 2021, reported mixed Q4 FY 2021 earnings results on Feb. 2. Earnings per share (EPS) missed consensus estimates, down 5.4% from the year-ago quarter. Revenue came in above analyst forecasts, increasing 19.9% year over year (YOY). The Facebook platform’s monthly active users (MAUs) matched expectations. Meta’s shares fell as much as 21% in extended trading. Over the past year, The company’s shares have provided a total return of 20.9%, just above the S&P 500’s total return of 19.9%.

FB Monthly Active Users

Meta’s MAUs rose 4% compared to the year-ago quarter to reach just over 2.9 billion. MAUs are a key metric Meta uses to gauge the size of the global active user base on its Facebook social media platform. Meta defines MAUs as registered and logged-in users who visited Facebook through its website or a mobile device, or used its Messenger app, sometime during the 30 days of the measurement period.

Meta derives nearly all of its revenue through selling advertising space, based largely on the strength of MAUs, on its social media sites and apps. The bigger its user base, the more attractive its platform is to advertisers. A bigger user base also makes it easier to attract new users, as people want to be on Meta’s social media platforms because their friends are on it—a classic example of the network effect.

FB New Financial Reporting Segment Structure

The fourth quarter was the first quarter for which Meta reported financial results in the following two segments: Family of Apps (FoA), which includes its main social media platform Facebook as well as Instagram, Messenger, WhatsApp, and other services; and Reality Labs (RL), which includes the company’s augmented and virtual reality related consumer hardware, software, and content.

Despite the change in the company’s name and reporting segment structure, Meta remains primarily a social media company. But the new reporting structure does highlight the new importance the company is putting on augmented and virtual reality, key technologies at the center of the virtual world the company hopes to build named the metaverse.

FB Outlook

Meta said that it expects total revenue to be somewhere between $27 billion and $29 billion in the first quarter of FY 2022, reflecting a YOY growth rate of between 3% and 11%. The company expects to face a number of headwinds, including increased competition for people’s time, a shift in user engagement to products that generate income at lower rates, various platform and regulatory changes, the impact of cost inflation and supply chain disruptions on advertiser budgets, and other factors.

Meta’s next earnings report (for Q1 FY 2022) is estimated to be released on April 26, 2022.