Meta set to report fourth-quarter earnings after the bell

Meta reports fourth-quarter earnings on Wednesday as the company tries to reverse a slide that pushed the stock down by 64% last year.

Here’s what analysts are expecting:

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• Earnings: $2.22 per share, according to Refinitiv
• Revenue:  $31.53 billion expected, according to Refinitiv
• Daily Active Users (DAUs): 1.99 billion expected, according to StreetAccount
• Monthly Active Users (MAUs):  2.98 billion expected, according to StreetAccount
• Average Revenue per User (ARPU): $10.63 expected, according to StreetAccount

Meta’s sales are expected to drop for a third consecutive quarter, underscoring the challenges the social media company faces as economic uncertainty leads businesses to reduce digital ad spending and pause campaigns.

Analysts expect the Facebook parent company to report a revenue decline of more than 6% for the fourth quarter, and they’re projecting one more quarterly drop before growth begins to tick back up later this year.

While the stock market started to rebound in January from a brutal 2022, economic forecasts still show a fairly gloomy 2023, which could spell continuing trouble for the online ad market. A recent Cowen survey of 50 ad buyers found that companies are planning to increase their ad spending in 2023 by only 3.3%, which the investment bank said is “the softest ad growth outlook we’ve seen in five years.”

On Tuesday, Snap reported fourth-quarter revenue that missed estimates, sending the shares tumbling in extended trading. The company also said its “internal forecast” assumes a revenue drop in the first quarter of between 2% and 10%.

While much smaller than Meta, Snap faces some of the same challenges, including a slowdown in online ad spending, increased competition from TikTok and weakened targeted advertising due to Apple’s 2021 iOS privacy update. Alphabet and Amazon will wrap up earnings reports from the major online ad platforms on Thursday, followed by Pinterest next week.

In November, Meta said it would lay off over 11,000 employees, or 13% of the workforce, as part of the company’s plans to reduce costs.

“We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1,” CEO Mark Zuckerberg said in a letter to employees at the time.

Last year was also marred by Zuckerberg’s costly effort to sell Wall Street on a plan to pivot the company towards the yet-to-be-developed world of the metaverse. Zuckerberg has said the metaverse, which would include virtual reality and augmented reality technologies, could represent the next major way people interact.

The big bet has frustrated investors, who worry the company is putting too much focus on a futuristic endeavor while its core ad business struggles to revive growth. Meta’s Reality Labs unit, home to the metaverse ambitions, lost nearly $9.4 billion in the first three quarters of 2022.

Analysts expect Reality Labs to show an operating loss of $4.36 billion for the fourth quarter on revenue of $715.1 million, according to StreetAccount. Meta said last quarter that “Reality Labs operating losses in 2023 will grow significantly year-over-year.”

WATCH: Snap shares plunge on weak revenue