Meta Platforms announced that the company's fourth quarter and full year 2021 financial results will be released after market close on Wednesday, February 2.
Beginning with the fourth quarter 2021 earnings results, Meta will report revenue and income (loss) from operations for the following two segments:
- Family of Apps (FoA) includes Facebook, Instagram, Messenger, WhatsApp and other services.
- Reality Labs (RL) includes augmented and virtual reality related consumer hardware, software and content.
In that report, analysts expect Meta Platforms to post earnings of $3.78 per share. This would mark a year-over-year decline of 2.58%. Meanwhile, the Consensus Estimate for revenue is projecting net sales of $33 billion, up 17.56% from the year-ago period.
Here's what to watch in Meta Platforms upcoming report.
Slowing revenue growth
Previously, Meta Platforms has missed market expectations for revenue in quarter three (Q3) 2021 and its forecast for Q4’s revenue at that time also came in below analysts’ estimates. With its share price on a downtrend ever since, the upcoming Q4 revenue will be on watch to validate if its sales growth can outperform.
"Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS 14 changes, and macroeconomic and COVID-related factors," explained Facebook's chief financial officer in the company's fourth-quarter earnings call.
One of the key performance metric, the average revenue per user (ARPU), may also be in focus. Seasonally, Q4 tends to see the ARPU figure pull ahead from the other quarters, considering that the year-end holiday season may see greater ramp-up for business advertising. That said, Apple's iOS 14 changes which require apps to seek users’ permission for data collection and sharing remains a weighing factor. This comes in the form of potentially reducing Meta Platforms’ accuracy for ads targeting and limiting their ad pricing as a result. We have seen the impact surface in Q3, with its ARPU declining 1.2% quarter-on-quarter (QoQ), in what should traditionally be an increase. With that, any further impact on the holiday-driven Q4 will continue to be on watch in measuring Meta Platforms’ ability to mitigate these changes.
User growth
Facebook continues to consistently grow its user base nicely. In the company's third quarter, total unique monthly users across the company's family of apps (Facebook, Instagram, Messenger, and WhatsApp) rose 6% year over year. Unique daily active users increased 11% year over year.
Meta Platforms management said in its most recent quarterly earnings call that its TikTok-like Reels video product has been a key growth driver for engagement on its platform. If Reels' momentum persisted, it wouldn't be surprising to see a slight uptick in Meta Platforms' fourth-quarter user growth rates.
"Reels is already the primary driver of engagement profiles," explained Meta Platforms CEO Mark Zuckerberg in the company's third-quarter earnings call. "It's incredibly entertaining, and I think that there is a huge amount of potential ahead. We expect this to continue growing and I am optimistic that Reels will be as important for our products as Stories is."
Metaverse
With Facebook’s recent name change to Meta Platforms, the company has placed its focus in building the metaverse, where it may already seem to be better equipped than other companies in being the pioneer for the theme. For one, it has its Oculus division which provides virtual reality headsets as a portal to that realm and recently, the company has announced to be in the midst of creating an AI supercomputer – AI Research SuperCluster to power the metaverse.
While its investments in the metaverse may not contribute to its topline in the upcoming Q4 results, or even subsequent years to come, any vision from the management in earnings call will be closely watched. This may include projected costs for metaverse-related development, expected timeline for launch and further reaffirmation of monetisation plans.
Investments for Metaverse, however, may lead to higher operating expenses and with the absence of any monetisation from that front in the near-term, its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin may be expected to come under pressure. Meta Platforms has anticipated to spend at least $10 billion in 2021 and expect to increase its investments for the next several years. While its EBITDA margin remains at a promising level of 42.8% in Q3 2021, the management has guided for 2022 margins to be lower than 2021. With that, any impact on margins will continue to be monitored ahead.