Ongoing targeting and measurement challenges with iOS.A slowdown in e-commerce that grew quickly during the pandemic.To the extent growth decelerated, management attributed it to the following: So the deceleration in revenue growth is not as bad as it looks. Meta Ad Revenue Growth Year-on-Year (Ex-Currency) - Stacked However, each quarter's year-on-year growth is also influenced by the growth rate the year before, and Q1 and Q2 2022 both have strong prior-year comparables, with Q2 2021's growth being close to 10 ppt higher than Q1's: Assume same growth rate for total and ad revenues in Q2 2022. Source: Meta earnings releases Librarian Capital estimates. Meta Ad Revenue Growth Year-on-Year (Ex-Currency) On the surface, Meta's ad revenue growth rates in Q1 and Q2 2022 represent the continuation of a down trend since Q2 2021: Growth Deceleration Not As Bad As It Looks However, Q1 2022 results contained evidence that Meta's strategy is on track, and that its earnings growth will resume soon. Prior Periods)įB guided to Q2 2022 total revenues of $28-$30bn, flat-ish sequentially and down 0.3% year-on-year (the latter after a 3 ppt currency headwind). Meta Revenues & EBIT by Segment (Q1 2022 vs. However, EBIT at Meta's core Family of Apps segment only fell 13.0%, whereas the small Reality Labs segment saw its Operating Loss expanded 62.0%, after costs rose 54.8% as FB continued to raise its Metaverse investments during the quarter: The EBIT decline in Q1 2022 was disappointing. EPS fell 17.4%, with the decline mitigated by a 4.9% reduction in the share count after buybacks:Ĭomparisons with Q4 2021 are not valid as Q4 included the holiday season. Cost & Expenses grew much more, by 31.0%, which meant EBIT was 25.1% lower. Meta's ad revenues grew 9.6% year-on-year in Q1 2022 including currency headwinds, total revenues grew 6.6%. Growth did indeed slow in Q1, and will remain low in Q2, but Q1 results provide evidence that Meta will resume its long-term earnings growth. Meta's share price collapsed 26% the day after Q4 2021 results in February, after management guided to much lower ad revenue growth (3-11%) in Q1 2022, and warned about the impact of competition from TikTok and anti-tracking changes in Apple's ( AAPL) iOS mobile platform. This helped Meta grow its ad revenues by 21.6% in 2020 and 34.6% in 2021, and its Adjusted EPS by 14.4% and 36.4%, respectively. The pandemic has accelerated Meta's business, with consumers spending more time on social media and businesses needing to attract customers in new ways.
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