Facebook reports revenue miss, plans to break out AR/VR top lines

U.S. social networking giant Facebook reported its Q3 financial results today after the bell. It reported $29.0 billion in total revenue and earnings per share of $3.22, calculated on a diluted basis. Investors had expected the company to report revenues of $29.58 billion, per data collected by Yahoo Finance, and earnings per share of $3.19.

Shares of Facebook are up modestly in after-hours trading, indicating that the street is not shocked that it came in slightly light on top-line.

That lack of surprise may be due to the fact that Facebook’s report comes in the wake of Snap’s digest, which dropped last week. Snap shares fell after the company indicated that it anticipated a far more modest Q4 than the market had, blaming Apple and supply-chain woes for its revenue growth troubles.

In its letter to investors, Facebook provided guidance for the fourth quarter of 2021, including revenues that will land between $31.5 billion and $34 billion. The market expects $34.89 billion, above what Facebook signaled.

The gap between Facebook forecasts and market expectations appears to come from expected sources. The social giant wrote the following in its earnings note regarding its Q4 guidance:

Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors. In addition, we expect non-ads revenue to be down year-over-year in the fourth quarter as we lap the strong launch of Quest 2 during last year’s holiday shopping season.

Changes to how Apple’s mobile operating handles privacy and the related downstream effects, along with issues stemming from COVID, were anticipated.

Facebook also reported in its investor digest that it will “break out Facebook Reality Labs, or FRL, as a separate reporting segment.” Citing that it expended “significant resources toward our augmented and virtual reality products and services,” the company thinks that it is time to have a second revenue category.

Starting next quarter, Facebook will have two segments. The first, its “Family of Apps” grouping, will feature results from “Facebook, Instagram, Messenger, WhatsApp and other services.” In contrast, FRL will include “augmented and virtual reality related consumer hardware, software and content.”

That is fine. Perhaps even good. But my god, Facebook, why not break out reporting on your social apps into more granular buckets as well? That would have been shareholder-friendly.

More to come; we’re still reading.