Originally published 2022-02-05.
Meta's stock crashed on Thursday 3 February 2022 because its quarterly results, released the evening before, landed several pieces of bad news at once. Facebook reported its first-ever drop in daily users, profit fell, Apple's privacy changes were biting into advertising, and the company's metaverse division had lost more than $10 billion in a year. Investors sold hard. By the close, roughly $230 billion of market value had gone, the largest one-day loss in value for any US company up to that point.
Here is what the numbers actually said, why the market reacted so strongly, and how the story looks with the benefit of hindsight.
What happened on 2 and 3 February 2022
Meta Platforms, the new name Facebook, Inc. had adopted in October 2021, published its fourth-quarter and full-year 2021 results after the US market closed on Wednesday 2 February. Shares slid more than 20% in after-hours trading. Early reports, including Bloomberg's, estimated a wipe-out of around $200 billion based on that pre-market slide.
The real damage came the following day. Meta's shares closed down roughly 26–27%, and the company's value fell by roughly $230 billion in a single session. Fortune described it as the largest single-day trading loss for any US company on record. Mark Zuckerberg, who owns about 13% of Meta, saw his personal wealth fall by around $29–31 billion, and he briefly dropped out of the top ten of Bloomberg's billionaires ranking for the first time since 2015.
The numbers behind the sell-off
Meta's own results release shows a company that was still very large and very profitable, but no longer growing the way investors expected:
- Revenue: $33.67 billion for the quarter, up 20% on a year earlier.
- Net income: $10.29 billion, down 8% year on year.
- Facebook daily active users: 1.93 billion on average in December 2021. That was up 5% on a year earlier but slightly down on the previous quarter, by about half a million people. It was the first quarterly decline the company had ever reported.
- Facebook monthly active users: 2.91 billion, up 4% on the year.
- Reality Labs (virtual and augmented reality, including the Quest headsets): an operating loss of $3.30 billion in the quarter and $10.19 billion for 2021.
- Outlook: first-quarter 2022 revenue of $27–29 billion, which meant growth of only 3–11%, a big slowdown for a company used to 20% or more.
The headcount had also grown 23% in a year, to almost 72,000 people. Rising costs and slowing revenue is a combination markets rarely forgive.
Why investors panicked
Facebook stopped growing
For most of its history, Facebook's investment story rested on more users every quarter. A loss of half a million daily users out of nearly two billion is tiny in absolute terms, but it broke a long run of growth and suggested that the core app had hit a ceiling in many markets. Younger users were spending more time on TikTok, Snapchat and YouTube and investors feared Meta was losing ground to these younger rivals.
Apple's privacy change hurt advertising
In 2021 Apple introduced App Tracking Transparency on iPhones, which asks users whether apps may track them across other companies' apps and websites. Many people said no. That made it harder for Facebook and Instagram to target ads and to prove to advertisers that their ads worked. Meta's management said the change would cost it about $10 billion in revenue in 2022.
The metaverse was very expensive
Meta had just renamed itself around the idea of a future virtual world, and Reality Labs was where that money went. Losing more than $10 billion in a year, with no clear date for profits, worried investors who were already nervous about slowing growth. One analyst, Tom Johnson of the media agency Mindshare Worldwide, told CNN before the results that investors would treat the numbers "as a first indicator of how far off the Metaverse is from being a profitable reality."
Myths and misreadings
"Facebook is dying." Not on these numbers. Nearly 2 billion people used Facebook every day, and Meta's family of apps, including Instagram, WhatsApp and Messenger, reached about 2.82 billion people daily. The worry was about growth and profit margins, not survival.
"Meta lost $230 billion." The company did not lose that cash. Its market value, which is share price times the number of shares, fell by that amount. The business still earned more than $10 billion in profit that quarter.
"The metaverse failed." A large loss in an early-stage research unit shows how costly the bet is, not that it has already failed. Whether the spending pays off is a question that takes years to answer, and Meta later shifted much of its emphasis towards artificial intelligence.
What happened next
2022 turned into a hard year. In July, Meta reported its first year-on-year fall in revenue, which analysts again linked to Apple's tracking rules and competition from TikTok. In November 2022 it cut about 11,000 jobs, around 13% of its staff, with Zuckerberg admitting he had wrongly expected the pandemic boom in online activity to last. A further plan in March 2023 cut another 10,000 jobs and closed 5,000 open roles.
The cost-cutting worked for investors. Meta's shares rose about 150% during 2023, and by January 2024 they had reached a record high, with the company valued close to $1 trillion. Meta also launched Threads, its rival to Twitter (now X), in July 2023.
Lessons from the crash
The February 2022 fall is a good example of how markets price expectations rather than current size. A hugely profitable company can lose a quarter of its value in a day if investors suddenly believe its future growth will be slower and more costly than they assumed. It also shows how dependent online advertising businesses are on platforms they do not control, such as Apple's iPhone software.
For ordinary readers and investors, the practical lesson is to look past a dramatic headline figure. Check which measure fell (users, revenue, profit or share price), over what period, and what the company itself says about the reasons. This page explains a historical market event and is not investment advice.
Sources: Meta Platforms, Fourth Quarter and Full Year 2021 Results (SEC filing); Fortune, 4 February 2022; Meta Platforms; original summary by Futurism.
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