Meta growth grinds to a halt, Qualcomm is firing on all cylinders

Meta to hit negative growth in Q2 for the first time ever

Meta shares are up 17% y/y as investors were relieved about the Q1 figures showing revenue came in line with estimates at $27.9bn and EPS at $2.72 vs est. $2.56. The investor reaction is unusual because the Q2 revenue guidance at $28-30bn was below estimates of $30.7bn something investors would typically have punished hard. It shows that sentiment was significantly worse than expressed by analysts in their estimates.

If we take Meta’s revenue guidance at the mid-point then the company will experience its first y/y decline in revenue in the company’s history which is a significant event. As the revenue growth chart shows, the declining revenue growth was already a trend before the pandemic, and the pandemic actually bought Meta a couple of years more with high growth masking the underlying structural issues. Maybe why investors and Meta themselves have surprised by the impact from TikTok? Another disturbing fact about Meta’s result was 1) the $3bn operating loss in its Reality Labs segment (metaverse/Oculus bet), and 2) that advertising pricing was -8% vs est. -4% which means that the way Meta mitigated the falling prices, likely stemming from losing tracking ability on iPhones, were to serve more ads which they did by serving 15% more ads compared to 12.8% estimated by analysts.