Facebook Misses Q3 Revenue Expectations, Announces AR/VR Reporting Split
Facebook falls short of Q3 revenue estimates due to Apple's privacy changes and pandemic headwinds. The company also announces plans to break out its Reality Labs division as a separate reporting segment next quarter.
Facebook reports $29.0 billion in total revenue for the third quarter, missing investor expectations of $29.58 billion. Despite the top-line miss, shares rise modestly in after-hours trading as the market anticipates the shortfall following a similar warning from Snap last week. The social giant attributes its slow revenue growth to continued headwinds from Apple's iOS 14 privacy changes, along with macroeconomic and COVID-related factors.
For the fourth quarter, Facebook provides revenue guidance between $31.5 billion and $34 billion, which falls below the market's expectation of $34.89 billion. The company warns that non-ads revenue will decline year-over-year as it faces tough comparisons with the strong holiday launch of the Quest 2 headset last year. These ongoing challenges highlight the broader impact of supply chain disruptions and stricter mobile privacy standards across the digital advertising industry.
In a notable structural change, Facebook announces it will break out Facebook Reality Labs (FRL) as a separate reporting segment starting next quarter. This new division encompasses the company's augmented and virtual reality consumer hardware, software, and content, while the traditional Family of Apps segment retains Facebook, Instagram, Messenger, and WhatsApp. The shift reflects the significant resources Facebook dedicates to its AR and VR products as it builds toward a future beyond traditional social media.