Meta's stock price jumped by more than 18% in after-hours trading Wednesday following the release of the company's better-than-expected first-quarter earnings report. Overall earnings growth was at its slowest in over a decade, but investors still remained confident in the company's ability to generate profits.
The jump in Meta's stock price was mostly due to Facebook's ability to still generate profits despite the global economic downturn. Meta said it managed to generate earnings of $7.47 billion over the three-month period, which was lower than the $9.5 billion it generated over the same period last year.
Revenue for the period was $27.9 billion, which was 7% higher than the $26.2 billion the company generated last year. Meta's earnings for the period were higher than average analysts' estimate of $28.3 billion for the quarter.
Meta issued lukewarm revenue guidance for the coming quarters. The company said it expects to generate revenue of between $28 billion to $30 billion for the second quarter, lower than the $30.7 billion expected by Wall Street. Meta said it expects to face headwinds from ongoing supply chain issues, the global economic downturn, the war in Ukraine, and increased competition from platforms such as TikTok.
Meta also mentioned the challenges it faces with the recent changes made by Apple to its mobile operating system. The company said the difficulty involved in tracking consumers in ads would negatively affect its ability to generate profits.
The company's Chief Financial Officer David Wehner said its guidance for the coming quarters is based on the assumption of a 3% headwind to year-over-year foreign currency growth.
During the company's virtual presentation to shareholders, Mark Zuckerberg acknowledged the increasing impact of competitors such as TikTok on its social media platform. However, Zuckerberg said he is still confident in the ability of its recently launched Facebook Reels short-form video feature and artificial intelligence technologies to remain competitive in the segment. He added that the company's plans to launch the metaverse should also help it generate more profits in the coming quarters, particularly from advertising.
The mixed results follow Google parent Alphabet reporting lower-than-expected revenue and earnings on Tuesday, raising fears that the company's reliance on advertising may be in trouble as a result of the ongoing conflict in Ukraine and rising prices. When Snap posted its earnings earlier this week, it cautioned of a "difficult operating environment" given the situation in Ukraine and rising inflation. Pinterest shares jumped when the company reported its earnings on Wednesday.
