Facebook parent Meta Platforms Inc on Wednesday forecast a weak holiday quarter and significantly more losses from Metaverse investments next year, sending shares down 14%.

The forecast knocked about $40 billion off its stock market value in extended trade. On top of the disappointing outlook, Meta is contending with slowing global economic growth, competition from TikTok, concerns about massive spending on the Metaverse and the ever-present threat of regulation.

Meta expects in 2023 to employ about the same number of employees as it did at the end of September.

The parent company of Facebook and Instagram beat estimates for quarterly revenue, which fell 4% to $27.7 billion in the third quarter ended Sept. 30, from $29 billion last year.

That deepened a revenue decline begun the previous quarter, when the company posted a first-ever revenue drop of 0.9%, but was less steep than the 5.6% decline Wall Street had expected, according to IBES data from Refinitiv.

GRAPHIC: Meta's revenue fell for a second straight quarter https://graphics.reuters.com/METAPLATFORMS-RESULTS/dwvkrbbwbpm/chart.png

It also posted user growth figures roughly in line with expectations, including a year-over-year increase of monthly active users on flagship app Facebook.

CEO Mark Zuckerberg said its TikTok-like short-video product called Reels now numbers more than 140 billion plays across Facebook and Instagram, up 50% from six months ago.

Reels' revenue run rates across Facebook and Instagram are now $3 billion. He believes Reels is gaining against rival TikTok with Reels being reshared more than 1 billion times a day.

More troubling was the company's estimate that fourth-quarter revenue would be in the range of $30 billion to $32.5 billion, under analysts' estimates of $32.2 billion, according to the Refinitiv data.

Meta also forecast that its full-year 2023 total expenses would be in the range of $96 billion to $101 billion, up from a revised estimate for 2022 total expenses of $85 billion to $87 billion.

That includes an estimated $2.9 billion in charges in 2022 and 2023 related to "consolidating our office facilities footprint."

Total costs for the third quarter came in above estimates at $22.1 billion, compared with $18.6 billion the year prior. Analysts had forecast around $20.6 billion.

"The worry for Meta is that this pain is likely to continue into 2023 as cost headwinds remain a real challenge and the strong dollar impacts on overseas earnings," said Ben Barringer, equity research analyst at Quilter Cheviot.

"Given revenues were down at a time when costs have grown significantly, modest user growth and impressions simply isn't going to bail you out."

Net income in the third quarter fell to $4.40 billion, or $1.64 per share, from $9.19 billion, or $3.22 per share, a year earlier, its worst showing since 2019 and the fourth straight quarter of profit decline.

Analysts had expected a profit of $1.86 per share.

  - Reuters