Meta Platforms (NASDAQ:META) announced its Q3 2022 financial results yesterday after the market closed. It missed expectations and, more importantly, provided worse guidance than expected.
As a result, the stock plunged after hours by -20%. The decline comes on top of the -61% decline YTD, making Meta one of the top losing tech stocks of the year.
CEO, Mark Zuckerberg, told investors that Meta plans to increase investments in the metaverse.
The problem is that the metaverse has not gained traction, few people use it, and the costs on the company’s side grow exponentially. So it looks like a failed bet, at least now, but Zuckerberg is known as a visionary, and some investors may have patience for a longer time.
However, looking at the quarterly financial results, one cannot wonder how long the company will burn cash on metaverse. The stock price is already down significantly YTD and falling.
Highlights of Meta’s Q3 2022 financial performance
A disastrous quarter for Meta just ended. Regardless of the details, the financial highlights speak for themselves.
Revenues were down -4%, income from operations -46%, and net income a whooping -52% – all of them compared to the same quarter last year.
On revenues – when inflation is 9% YoY, and you report -4% revenues, the earnings miss is amplified by the inflation rate. At the same time, the operating margin declined consistently, reaching 20% from 36% one year ago.
If the revenue decline was not enough to scare investors, Meta reported a massive increase in costs and expenses of 19% YoY. Moreover, it added 19k new employees or 28% more to its workforce.
In conclusion, yesterday’s quarterly report shows a declining financial position of what used to be one of the most solid tech companies in the United States. Moreover, it gives the impression that there is zero cost control over the company’s finances, and Zuckerberg is making an all-in bet on the metaverse.
Even for those willing to take this one-street bet, it may be too risky as the company may run out of money before seeing meaningful results from its metaverse investment.
For now, the market punished the results by slashing another 20% of its market capitalization.