Facebook Parent Meta Expected to Post Slowest Revenue Growth Since IPO

Since that report, Meta shares have fallen nearly 44%, and the company has lost nearly $388 billion in market value.

The earnings are set to be released after markets close on Wednesday.

Investors will be looking for any signs Meta can show of progress minimizing the effect that ad-tracking changes introduced by

Apple Inc.

last year have had on its advertising business. Last quarter, the company warned that those changes would cost Meta some $10 billion in 2022.

For the quarter, advertising is expected to represent 97.3% of the company’s revenue, according to analysts surveyed by FactSet. Analysts predict Meta’s advertising revenue will rise to $28.3 billion in the first quarter of 2022, up a little more than 8% compared with a year prior.

If Meta’s overall revenue growth comes in below 10.7% compared with the year-ago quarter, it would mark the slowest pace since the company went public in 2012.

The company is also expected to report a $7.1 billion profit, which would represent a decline in net income for the second quarter in a row. This would be the first time the company posted a pair of declines in quarterly net income since the second quarter of 2019.

Social-media rival

Snap Inc.

posted its first-quarter results last week, showing that its business is continuing to feel the sting from Apple’s privacy changes. Google parent

Alphabet Inc.

on Tuesday also posted slower sales growth as global economic turmoil disrupted digital-ad spending.

Recent changes from Apple and Google related to ad tracking, as well as the broader regulatory environment “continue to evolve to favor greater consumer privacy, which likely creates continued headwinds,” wrote Andrew Boone, analyst at JMP Securities, a Citizens Company, in a note to investors.

Meta is also expected to report an uptick in its daily users to 1.95 billion, from 1.93 billion reported in February. Last quarter, the company’s daily active user base fell by two million users, which was the first time the company had reported a decline in users.

A key reason for that decline was the impact of growing competition from ByteDance Ltd.’s TikTok, which serves users short-form videos. Meta has responded to the threat of TikTok by expanding the availability of its own short-form video format, known as Reels.

Last quarter, the company reported that while Reels was now the company’s fastest-growing content format, TikTok was growing even faster.

Another problem cited by Meta executives last quarter is that Reels isn’t yet monetizing as quickly as its feed and stories formats are, but it is beginning to eat into the time that its users spend on those features. That hurts the company’s ability to deliver ads to users.

“It’d be good to know if there’s any data that came out this quarter that specifically called out an acceleration of Reels adoption, especially by a younger user group that has been largely in favor of TikTok,” said Daniel Newman, principal analyst at Futurum Research, which focuses on digital technology.

Beyond its advertising business, Meta may provide clues into what progress the company has made on its metaverse business. The company announced its long-term bet on VR headsets, AR glasses and virtual worlds, known as the metaverse, in which users can live and work, in October. The company at the time said it would be changing its name to Meta to reflect its new ambitions.

The company has warned that building the metaverse will take many billions of dollars in investments and several years of work, but it has yet to provide any stats that show it has made meaningful progress turning this vision into a business.

“We’re focused on their ability to innovate and transition the company,” said Dan Flax, senior analyst at Neuberger Berman. “That remains critical over the next one to two years.”

Broader-world factors, like rising inflation, supply-chain disruptions and the war in Ukraine, could also impact Meta. In particular, those global factors could hurt Meta’s small-business and e-commerce advertising efforts, said

Justin Patterson,

equity research analyst with KeyBanc Capital Markets.

“When you see things like inflation, like broader slowdowns in certain sectors of the economy, that does weigh on the amount of incremental budget that’s getting deployed through ad platforms,” Mr. Patterson said.

Write to Salvador Rodriguez at [email protected]