Facebook’s Shares Plunge After Profit Fall, Weak Outlook

The company said it expected revenue growth to slow because users were spending less time on its more lucrative services. Facebook also cited inflation as a weight on advertiser spending. It lost about a million daily users globally and stagnated in the U.S. and Canada, two of the company’s most profitable markets, the results show.

The earnings report shows Facebook’s business is under pressure on a number of fronts, at a moment when Mr. Zuckerberg is betting the company’s future on VR headsets, AR glasses and virtual worlds, known as the metaverse, in which users can live and work.

The company reported a $10.3 billion profit for the fourth quarter, below analyst expectations of $10.9 billion, and a small decline compared with a year earlier. This marked Meta’s first decline in net income growth since the second quarter of 2019.

Meta also for the first time broke out its Reality Labs segment, which offered investors insight into the health of the virtual- and augmented-reality consumer business unit that is at the heart of the metaverse efforts.

The Reality Labs unit posted a $3.3 billion loss, an amount that has grown consistently in recent quarters.

Upon announcing the name change in October, Mr. Zuckerberg said that the company expected “to invest many billions of dollars for years to come before the metaverse reaches scale.”

Investors said the combination of slower revenue growth with higher spending on initiatives like the metaverse would turn off some shareholders. “I’m going to spend a lot of time creating this new thing and I’m getting less revenue: It’s not a match made in heaven,” said Kim Forrest, chief investment officer of investment firm Bokeh Capital.

The company said it faced stiffer competition for its users’ time. It is also seeing a shift in time spent within its services toward video-heavy features like Reels, which don’t make the kind of money Facebook generates on older features like its News Feed and Stories, which allows people to post videos and images that disappear after 24 hours.

“I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse,” Mr. Zuckerberg said in the company’s release announcing the results.

Meta continues to face criticism from lawmakers and users over revelations in The Wall Street Journal’s “Facebook Files” series, which showed that the company knows its platforms are riddled with flaws that cause harm. Those articles spurred congressional hearings, prompted a rebuke from Facebook’s own oversight board and led the company to halt work on a version of its Instagram app focused on children.

The company has also endured a series of executive departures in recent months. Most notably, Chief Technology Officer Mike Schroepfer, head of Facebook’s cryptocurrency efforts David Marcus and the head of the company’s Messenger unit, Stan Chudnovsky, all announced their exits in the last months of 2021.

The earnings, released after markets closed on Wednesday, followed a rough January for U.S. equities. It was the worst month for the tech-heavy Nasdaq Composite since March 2020 as investors consider how rising interest rates could weigh on the tech sector’s pricey valuations.

Shares of Meta fell more than 7% in January alone, continuing a more than 16% slide since the company closed at a record high on Sept. 7 through its close on Tuesday.

Write to Deepa Seetharaman at [email protected] and Salvador Rodriguez at [email protected]