Meta, the company that now represents Facebook, Whatsapp, Instagram, and Oculus, reported its fourth quarter earnings.
The earnings were lower than expected. There was a reduction in profit.
But that’s not all. For the first time in history, the active user base of Facebook dwindled (reduced) too.
Active user base is the number of people who actively use a website or service.
This is the first financial report from the company since it changed its name to Meta.
Other tech companies like Alphabet Inc (Google), Microsoft, and Apple, who also shared their results in the same week, actually did better than people expected them to. All of them posted results that had good revenue and profit growth.
Why did the drop happen?
According to Facebook, the drop in revenue happened because advertisers are not able to spend as much money on advertising as they used to.
The second reason they mentioned was that Apple’s new privacy feature has hit their business hard.
What happened as a result of the drop?
The next day, on February 3rd, Facebook’s shares dropped by 26% in a single day. This is the largest loss in a single day in the US stock market.
The stocks continued to drop on the next day too.
In this 5-day graph taken from Yahoo! Finance, we can see that the prices remain lower than they were on Wednesday. Amazon Inc., on the other hand, after dropping on Thursday, opened higher on Friday.
What happens now?
Stock price movements are important for people who invest in stocks. They are only indicative of how people in the business of finance view a company.
In India, at the peak of the pandemic, the stock prices rose a lot. So, stock prices do not always mirror what is happening in the rest of the economy. To get a complete picture of how an economy is doing, we have to look at various factors, stock prices are only one of them.