2021 is a frenetic and glorious year for the US stock market. The three major indexes have risen for three consecutive years. In 2021, the S&P 500 index has risen by 26.9%, hitting a new high of 70 times. The funds flowing into the stock market have exceeded 10 billion US dollars for the first time. Turnover hit a record $10.3 billion. U.S. technology stocks represented by FANNMG performed particularly well, becoming an important factor driving the Nasdaq, making the entire U.S. stock market a thriving trend.

However, this situation will reverse in 2022. Since the beginning of 2022, with the implementation of the Fed’s monetary tightening policy, investors’ interest rate expectations have been affected, and the instability of the international environment has exacerbated the turmoil in the stock market. The US market has plummeted. The three major indexes tumbled one after another, and large U.S. technology stocks suffered their biggest sell-off in a decade.

U.S. tech stocks go through tough times, Meta falls among the top losers

As of April 26, 2022, the Nasdaq has fallen 21% this year; the S&P 500 has fallen 13%; Meta platform Inc., Apple Inc., Amazon.com Inc. com Inc., Netflix Inc., Microsoft Corp. and Alphabet Inc.’s “FAANMG” index fell 17 percent. The FAANMG index currently accounts for 23.8% of the S&P 500 by market capitalization.

Specifically, as of April 27, among the six major technology stocks of FAANMG, Netflix (NFLX) has fallen the most, and its market value has fallen by 67% since the beginning of the year; Facebook’s parent company Meta platform Inc. (META) has fallen. Also reached 46%; Microsoft (MSFT) fell 20%; Google (GOOGL) 18%; Amazon (AMZN) fell 16%; Apple (AAPL) also fell 12%.

Meta Platforms Inc. is the youngest company in the FAANMG index, but has experienced almost the same fate as Netflix in 2022, with its share price nearly halved year-to-date. After the release of the first-quarter earnings report, Netflix gave its share price a heavy blow because the global net paying users decreased by 200,000 in the first quarter, a difference of nearly 3 million compared with the previous market expectation of 2.73 million.

As a veteran social media, according to the 2021 annual report previously released, Facebook is also facing the problem of slowing user growth. Some markets have even shrunk, and the market has questioned Facebook’s growth. sell off. At the same time, Facebook changed its name to Meta in 2021, which means that the metaverse will become the strategic focus of Meta in the next stage. Meta believes that it can develop related new technologies and become the leader of the metaverse industry. Meta’s bet on the Metaverse gives investors fresh expectations for the company’s future.

On April 28, Meta released its financial performance report for the first quarter of 2022. How is the development of the Metaverse business? Can it meet investor expectations? Can the problem of slowing user growth be improved in the first quarter?

Meta’s revenue growth rate hit a record low, and net profit grew negatively

Let’s first look at the company’s overall revenue. In the first quarter of 2022, Meta achieved revenue of $27.9 billion, a year-on-year increase of 6.64%. Before the first half of 2021, the epidemic was more severe, which brought a large amount of user traffic to Meta, stimulated related business needs, and ushered in a relatively high year-on-year growth rate in revenue. However, with the easing of the epidemic, the company’s revenue growth rate has declined significantly for four consecutive quarters. The year-on-year growth rate of only 6.64% in this quarter is already the lowest level of Meta in the past ten years.

Meta’s main source of revenue is the revenue from the advertising business, which accounts for more than 95% of the company’s total revenue. Meta’s advertising revenue in the first quarter was $27 billion, and the year-on-year growth rate has also slowed to 6%.

(Data source: company financial report)

The performance of Meta’s net profit was also not satisfactory. In the first quarter, it recorded a net profit of 7.4 billion yuan, a year-on-year decrease of 21.4%. The trend of the company’s net profit is roughly the same as that of revenue. The growth rate has declined significantly for four consecutive quarters. is negative, and the decline widens. The world’s largest social software seems to have reached a bottleneck in performance growth, with a sharp drop in revenue and profitability.

The downward trend of user growth remains unchanged, and Metaverse’s business is losing money

Let’s look at the company’s user metrics. In the first quarter, Meta’s average daily active users (DAUs) were 1.96 billion, an increase of 4% year-on-year, and the same as the previous quarter. The daily activity stagnated in the fourth quarter of last year and resumed growth this quarter. From the perspective of monthly active users (MAUs), Meta’s MAU in the first quarter was 2.94 billion, a year-on-year increase of 3% from 2.85 billion in the first quarter of 2021. Both MAU and DAU show a very obvious downward trend, and the user growth in individual quarters cannot confirm the long-term growth trend of Meta in the future.

Obviously, the surge in traffic brought to Meta in the short term during the epidemic will not change the fact that the company’s growth has encountered bottlenecks and user traffic has gradually peaked. Meta announced last year that it changed its name to meta, perhaps realizing the company’s current growth dilemma and wanting to make breakthroughs in new fields, and betting on the metaverse may be able to find a new way for the company to break through.

The company mentioned in its earnings report that Meta builds technology that helps people connect, find communities, and grow their businesses. When Meta launched in 2004, it changed the way people connect. Apps like Messenger, Instagram and WhatsApp further empower billions of people around the world. Now, Meta is moving beyond 2D screens to immersive experiences like augmented reality and virtual reality to help build the next evolution of social technology.

But judging from the Metaverse’s business disclosed by the company, the revenue is not optimistic. Meta’s AR and VR-related hardware, software and content, that is, Metaverse-related revenue, Reality Labs’ revenue was $695 million in the first quarter, down 20.7% from $877 million in the fourth quarter of last year; The chamber recorded a loss of $2.96 billion.

Overall, Facebook’s performance in the first quarter was unsatisfactory, with a record low revenue growth rate and a negative year-on-year growth in net profit. Although the user index has resumed growth, it is difficult to change the fact that the overall user growth rate has declined. The global social giant is going through a difficult time, and it’s unclear whether the Metaverse will bring new growth to the company. What is certain is that Meta will experience a more severe test in 2022 than in 2021. It is not realistic for Meta to rely on the metaverse in the short term. On the contrary, the increase in business expenditure and investment in the metaverse will bring about the company’s performance. greater pressure.

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