Meta shares tumbled 6% on first-ever revenue drop.
The company said it expects third-quarter revenue of between $26 billion and $28.5 billion. Analysts were expecting $30.52 billion, according to IBES data from Refinitiv.
Total revenue, which consists almost entirely of ad sales, fell 1% to $28.8 billion in the second quarter ended June 30, from $29.1 billion last year. The figure slightly missed Wall Street's projections of $28.9 billion, according to Refinitiv.
The company reported mixed results for user growth.
Monthly active users on flagship social network Facebook came in slightly under analyst expectations at 2.93 billion in the second quarter, an increase of 1% year over year, while daily active users handily beat estimates at 1.97 billion.
Like many global companies, Meta is facing some revenue pressure from the strong dollar, as sales in foreign currencies amount to less in dollar terms. Meta said it expected a 6% revenue growth headwind in the third quarter, based on current exchange rates.
Still, the Meta results also come as fortunes in online ads sales appear to be diverging between search and social media players, with the latter impacted more severely as ad buyers reeling in spending.
Alphabet Inc, the world's largest digital ad platform, reported a rise in quarterly revenue on Tuesday, with sales from its biggest moneymaker - Google search - topping investor expectations.
Snap Inc and Twitter both missed sales expectations last week and warned of an ad market slowdown in coming quarters, sparking a broad sell-off across the sector.
The results shed light on the unique strain Meta's core social media business is experiencing, as it competes for users' time with short video app TikTok and adjusts its ads business to privacy controls rolled out by Apple Inc last year.
Meta said Reels, a short video product it is increasingly inserting into users' feeds to compete with TikTok, was now generating over $1 billion annually in revenue.
"They are being greatly affected by everything, and I'd probably give it a third, a third and a third," Bokeh Capital Partners' Kim Forrest said, referring to the economy, global ad market slowdown and competition from TikTok and Apple.
"Meta has a problem because they're chasing TikTok and if the Kardashians are talking about how they don't like Instagram ... Meta should really pay attention to that."
About 15% of content on Facebook and Instagram is recommended by AI and that percentage will double by the end of 2023, CEO Mark Zuckerberg said.
The world's biggest social media company is simultaneously carrying out several expensive overhauls to keep that core business pumping out profits, while also investing in a longer-term bet on "metaverse" hardware and software.
For now, at least, the metaverse part of the business remains largely theoretical. In the second quarter, Meta reported $218 million in non-ad revenue, which includes sales of devices like its Quest virtual reality headsets, down from $497 million last year.
Its Reality Labs unit, which is primarily responsible for developing metaverse-oriented technology like the VR headsets, reported sales of $452 million, down from $695 million in the first quarter.
Meta will release a mixed-reality headset called Project Cambria later this year focused on professionals.
Meta broke out the segment in its results for the first time earlier this year, when it revealed that Reality Labs had lost $10.2 billion in 2021.
Meta's second-quarter operating profit margin fell to 29% from 43% as costs rose sharply and revenue dipped.
In November, Chief Financial Officer David Wehner will become Meta's first chief strategy officer. Susan Li, Meta's current vice president of finance, will become CFO.