It was updated on April 28, 2022.
Despite missing first quarter revenue estimates, shares of Facebook parent company Meta surged roughly 13% on Thursday after reporting solid user growth, which bounced back from a small decline in the previous quarter.
Meta shares surged as user growth rebounded.
The company's daily active users increased in the first quarter from 1.93 billion to 1.96 billion, as investors cheered the increase.
The company's user growth fell for the first time in its history in the fourth quarter, but rebounded in the first quarter.
Despite solid user growth, Meta reported lackluster revenue, with sales growing just 7% from a year ago, its first time as a public company that revenue only grew in single digits.
The company forecasts lower expenses for the full year, but the total costs and expenses of $19.4 billion surged in a dramatic increase.
The company projects revenue for the second quarter to come in between $28 billion and $30 billion, which falls short of the $30.7 billion forecast by Wall Street analysts, though Meta blamed part of the weaker guidance on the war in Ukraine and lost subscribers in Russia.
Meta shares were down 50% so far in 2022, hard-hit by the wider sell-off in tech shares that has gone on this year, as investors worry about aggressive interest rate hikes from the Federal Reserve.
Forbes estimates the worth of Meta co-owner Mark Zuckerberg.
Despite missing estimates on several key metrics, Meta's latest earnings report is still a big step up from fourth quarter earnings last year, when the company reported its first decline in daily active users on record. The stock plunged 26% on February 2, its worst single-day drop ever, after Meta slashed its revenue outlook and user growth fell.
The bar was low for Meta going into earnings, but this report is likely to clear it.
Charles Lemonides, founder and chief investment officer at ValueWorks, says that Meta still faces several business challenges and bumps in the road on execution, as well as concerns about growth and their competitive environment.
Big Tech stocks have already been hard-hit by the broader market sell-off this year, and a big earnings miss from Netflix last week added to that uncertainty. The company lost subscribers for the first time in over a decade, causing shares to plunge in a single day.
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