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Meta, the parent company of Facebook and Instagram, reported $28.8 billion in second-quarter revenue, falling within its projections of reaching $28 billion–$30 billion for the quarter but representing a roughly 1 percent decline in revenue year over year.
The company also saw net income fall by 36 percent, landing at $6.7 billion for the second quarter, while total costs and expenses rose by 22 percent to hit $20.5 billion. And as the social media giant faces heated competition from rivals like TikTok, daily active users across Meta’s family of apps were in the low single digits; Meta’s flagship social platform, Facebook, saw a modest 3 percent increase during the second quarter.
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Executives pointed to a “weak advertising demand environment” that is expected to continue into Q3, according to Meta’s earnings release. The company is forecasting revenue between $26–28.5 billion for the quarter.
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Meta CEO Mark Zuckerberg said during the company’s earnings call. “Given the more recent revenue trajectory that we’re seeing, we’re slowing the pace of [our] investments and pushing some expenses that would have come in the next year or two off to a somewhat longer timeline.”
The top executive also said the company would be reducing its “headcount growth over the next year.” “Many teams are going to shrink so that we can shift energy to other areas inside the company, and I want to give our leaders the ability to decide within their teams where to double down, where to double down, where to backfill attrition, and where to restructure teams while minimizing [the impact] to the long-term initiatives,” Zuckerberg said.
Meta’s earnings report comes as other major tech players like Snap have seen a decline in ad revenue, leading to tumbling stock prices. Alphabet on Tuesday also reported an earnings miss, with YouTube ad revenue hitting $7.3 billion amid a continued advertiser spending “pullback,” according to Alphabet CFO Ruth Porat.
Internally, Zuckerberg reportedly told staff earlier this month to prepare for the “worst downturns that we’ve seen in recent history. The company is also slowing down its hiring and is expected to cut back its hiring of engineers by at least 30 percent, Reuters reported.
To compete with TikTok, which is forecasted by Insider Intelligence to exceed $11 billion in digital ad revenue by 2024, Meta has increasingly pushed its short-form video offering, Reels, across Instagram and Facebook. The move has led to recent pushback from creators who say their photos have received less engagement as a result of the emphasis on video, leading Instagram head Adam Mosseri to address the criticism in a video shared on Tuesday.
In the video, Mosseri attempted damage control by arguing that more users are sharing and consuming videos so that the company will “have to lean into that shift” toward video while “continuing to support photos.”
During Meta’s earnings call, Zuckerberg gave a nod to Reels and said the company saw a 30 percent increase in the time that users spent engaging with Reels across Facebook and Instagram.
In November, Meta’s chief financial officer, David Wehner, will transition to the new role of chief strategy officer. Susan Li, currently Meta’s vp finance, will be promoted to the CFO role.
July 27, 2:04 p.m.: Updated to reflect Meta’s revenue at $28.8 billion.