Meta prepares to report earnings amid ad revenue and cost-cutting pressures

Meta Corporation (META) is preparing to report its third-quarter earnings after the closing bell on Wednesday.

Here’s what Wall Street expects from Facebook’s parent company, as compiled by Bloomberg:

he won: $27.4 billion expected

earnings per share (EPS)Expected: $1.88

Facebook Daily Active Users (DAUs): 1.86 billion expected

The digital advertising slowdown has been a top priority for Meta and Big Tech in general heading into earnings this week. On Tuesday, Google subsidiary Alphabet (GOOG, GOOGL) reported a major failure in YouTube ad revenue. Meta comes around in the second quarter, as the company missed analysts’ expectations in terms of both earnings per share and revenue. However, these weren’t just any mistakes – they coincided with the tech giant’s first-ever revenue decline.

Things haven’t gotten much better since then. Meta Connect, the company’s annual flagship event, has set a trend for Meta that includes corporate partnerships with Microsoft (MSFT) and Accenture (ACN). It seems that Wall Street is not yet convinced. Atlantic Equities even lowered the company’s rating this month and a drop in shares followed.

AUSTIN, Texas – MARCH 15: Mark Zuckerberg speaks, via video, at Into the Metaverse: Creators, Commerce and Connection during the 2022 SXSW Conference and Festivals Conference and Festivals at the Austin Convention Center on March 15, 2022 in Austin, Texas. (Photo by Samantha Burkardt/Getty Images for SXSW)

So, what are analysts looking for? Some are concerned about daily active users, fearing growth will wane. The company’s advertising business also remains under a lot of pressure, not only due to heavy competition from the likes of TikTok, but in the wake of Apple’s privacy changes (AAPL). The change, called App Tracking Transparency, is expected to cut $10 billion in Meta revenue this year alone.

The Meta Index is down 58% year-to-date as of the market close on Tuesday.

‘Meta needs to get her magic back’

It’s a tense moment across the board for Meta. Former COO Sheryl Sandberg left the company for good just a few weeks ago, while Meta was cutting costs as it tries to manage its hub in virtual reality apps and metaverses. This week, Altimeter Capital contributor Brad Gerstner sent an open letter to Meta CEO Mark Zuckerberg, criticizing how successful the company was with its reverse investment.

Gerstner wrote on October 24: “Meta’s investment in the meta… has gotten the most attention and led to a lot of confusion. Perhaps it was the rebranding of the company to Meta that made the world conclude that you were spending 100% of your time at Reality Labs rather than in smarts. artificial or basic business. Whatever the reason, that is certainly the perception.”

There are some potential bright spots on the horizon. For example, the Meta Quest Pro is now available, which the company is touting as the best and most expensive VR headset to date. Gerstner also expressed optimism about Meta’s social media business.

“Meta’s core business is one of the largest and most profitable in the world with profits exceeding $45 billion in the last year alone,” he said. “Moreover, Meta has industry-leading capabilities in key future technologies such as artificial intelligence and immersive 3D that will help drive new products and future growth.”

However, looming doubts about Meta, from Wall Street and investors alike, have long been in the works.

“Meta needs to get its magic back,” Gerstner wrote. “Meta needs to rebuild trust with investors, employees, and the technology community in order to attract, inspire and retain the best people in the world. In short, Meta needs fitness and focus.”

Allie Garfinkle is a senior technical reporter at Yahoo Finance. Follow her on Twitter at Tweet embed.

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