Facebook parent Meta Platforms Inc. said user additions stalled in the fourth quarter and gave a disappointing forecast for the current period, raising concerns about the company’s future growth. Shares plunged as much as 24 per cent in late trading.

Facebook reported 2.91 billion monthly users in the fourth quarter, representing no growth from the prior period. The social network is feeling the impact of increased competition for users’ time, and a shift in interest to video where advertising isn’t as lucrative. 

Meta said revenue in the current quarter would be US$27 billion to US$29 billion, compared to US$30.25 billion analysts estimated on average. 

The misses come at a critical juncture for the company, which is fighting regulatory battles on multiple fronts and also trying to justify a costly shift in corporate strategy to bet on the metaverse, Chief Executive Officer Mark Zuckerberg’s vision for an immersive internet. For years, it seemed like Facebook would never stop growing. Now young users -- the future consumers of its advertising -- are choosing platforms like TikTok and YouTube for entertainment and community instead.

The company, which changed its name to Meta last year to indicate its future direction, will be taking on the META stock ticker in the first half of the year, it said today. Shares plunged as low as US$244, after closing at US$323. The stock, which currently trades under the ticker FB, has declined 4 per cent so far this year.

“Facebook Reality Labs is the great unknown,” Brad Erickson, an analyst at RBC Capital Markets, said in a note to investors. That division, which includes the company’s investments in the metaverse and virtual reality, reported an operating loss of US$3.3 billion, as the company disclosed its contribution for the first time.

Meta’s net income was US$10.3 billion, or US$3.67 per share, compared with the US$3.84 per share analysts projected. Fourth-quarter revenue was US$33.67 billion, beating the US$33.43 billion that Wall Street analysts estimated.

When Meta changed its corporate name, the move was criticized as a distraction from the many problems Facebook has been asked by regulators to fix with its existing networks. But it’s not just branding -- resources and talent within Facebook have shifted to the new focus. Meta said in October that it would see a US$10 billion reduction in operating profit for the year because of investments in Reality Labs.

What Bloomberg Intelligence Says:
“The new disclosure of the Reality Labs segment’s operating loss of US$10.2 billion for 2021 points to at least a 10 percentage-point drag on overall operating margin, which could get worse in the near to medium term.”
 --Mandeep Singh, BI senior technology industry analyst 

It’s the first earnings report since Zuckerberg declared that attracting young people -- 18- to 29-year-olds -- was the company’s new “North Star.” It’s unclear how the company plans to disclose its progress toward that goal. Meta does not regularly break down users by age. It also doesn’t say how many people use Instagram or messaging service WhatsApp, or how much revenue those properties generate.

Meta has warned for months about recent changes to Apple Inc.’s iOS software for iPhones, requiring that companies like Meta ask users for explicit permission to gather data about them that is useful for ad targeting. Early estimates show that most users decline this tracking, which makes targeted advertising harder. Menlo Park, California-based Meta said third-quarter sales were down in part because of this impact on ad targeting.