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The shares of the mother of Facebook Meta are growing despite the slowdown in revenue growth

Meta, Facebook’s mother, posted her slowest revenue growth since it went public, but its share price jumped as profits held up better than expected in the face of several headwinds, including the aftermath of Russia’s invasion of Ukraine. .

The company reported a profit of $ 7.5 billion in the January-March quarter, down 21 percent from the same period last year, but above Wall Street’s expectations of about $ 7.1 billion, according to S&P Capital IQ.

Revenue was $ 27.9 billion, up 7% from last year, despite pressure from Russia’s invasion of Ukraine, increased competition and a shift in Apple’s privacy that weighs heavily on social media platforms. This did not meet the already low expectations of analysts.

The company said it expects negative trends to continue in the current quarter, citing the “softness” stemming from the impact of the conflict in Ukraine. He forecasts a range of $ 28 billion to $ 30 billion in second-quarter revenue. Analysts had hoped it could exceed $ 30 billion.

But unexpectedly strong profits and forecasts of lower spending for the rest of the year appear to have helped investors in after-hours trading, with shares jumping nearly 20 percent. The company lowered its cost estimate this year to $ 87 billion to $ 92 billion, less than its previous estimates of $ 90 billion to $ 95 billion.

Overall, the results were “better than fears” from Wall Street, said Jefferies analyst Brent Thill.

Advertising revenue, which generates almost all of the company’s revenue, is $ 26.9 billion. Analysts had hoped for $ 27.6 billion, according to Refinitiv. The aftermath of the war in Ukraine also weighed heavily on sales. The Kremlin has banned Facebook while a social media group has blocked Russian advertisers from doing business with the platform.

Meta said the number of ad impressions in its applications has increased by 15 percent compared to last year, while the price it charges for advertising has fallen by 8 percent.

Mark Zuckerberg, CEO and founder, said his longstanding projects, such as artificial intelligence and the metaverse, would be mastered “given our current levels of business growth.”

“These investments will be important for our success and growth over time, so I continue to believe we need to make them,” he told investors on Wednesday.

The Reality Labs segment – covering its meta-universe and virtual reality efforts – had a net loss of $ 3 billion in quarterly revenue of $ 695 million.

The “family” of the company’s applications, including Instagram and WhatsApp, registered 2.87 billion active users daily during the quarter, which is a 6% increase on an annual basis.

The increase in active users was better than expected at a time when investors are looking closely at how many users, especially younger ones, are finding alternatives like TikTok for a more attractive place to spend time online. Zuckerberg heralds the growth of Reels, the imitator of TikTok, which the company recently added to the Instagram app.

Cheryl Sandberg, chief operating officer, said the company sees strong potential in implementing an advertising model for Reels, which accounts for 20% of all time spent on the Instagram app.

“We have a lot of consumer engagement with Reels, we have rapid growth,” Sandberg said. “And we have a book for implementing that kind of consumer engagement and advertising in the experience. It will be a long journey. . . but this is one we are very optimistic about. ”

Zuckerberg warned investors this year that the company would struggle to meet Wall Street’s high expectations, blaming “growing competition” from competitors, especially TikTok.

Recent changes in Apple’s privacy have also hampered Meta’s business model, limiting its ability to customize advertising, the main source of revenue.

Following Meta’s disastrous fourth-quarter earnings of 2021, more than $ 220 billion was removed from its market capitalization in its biggest drop in share price since it went public in 2012. Shares were still down about 49 % of the beginning of the year before earnings release on Wednesday.

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Zuckerberg at the time blamed growing competition for distracting consumers. “People have a lot of choices about how they want to spend their time, and applications like TikTok are growing very fast,” he said.

Forrester Research Director Mike Prulks warned that maintaining TikTok’s rapid growth would be difficult. “Although the short video now accounts for 20% of the time spent on Instagram, it is 100% of the time on TikTok – an application that has already been monetized and continues to grow in segments of generations,” he said.

Macroeconomic uncertainty, such as high inflation and the war in Ukraine, have prompted other advertisers to cut budgets. On Tuesday, the owner of YouTube Alphabet said his advertising business was slowed by the conflict, which did not meet analysts’ expectations.