The news: In a surprise to no one, Facebook and Instagram parent Meta did not turn its fortunes around in Q3.

• Analysts expected $27.38 billion in revenue, per Refinitiv; Meta netted $27.71 billion, down 4% from a year ago.
• The company reported 1.98 billion daily active users (DAUs) in September, a 3% increase from Q3 2021. It also had 2.96 billion monthly active users (MAUs), up 2%.
• StreetAccount's average revenue per user (ARPU) estimate was $9.83; ARPU came in at $9.41.
• Expenses as a percentage of revenue reached their highest level in nine quarters; relatedly, net income fell 52%.

Q3 in hindsight:

• Earlier in October, Meta expanded its ad offerings for Instagram, Messenger, and Reels.
• Meta has agreed to sell Giphy to comply with the UK’s Competition and Markets Authority (CMA), which initially ordered the company to do so in 2021.
• The company tried to push some longtime staffers out the door—something that has reportedly pummeled morale. Even with those quiet layoffs, headcount as of September 30 was still 28% higher than a year ago.
• Meta was accused of using an in-app browser as a workaround to counteract Apple’s 2021 tracking changes, keeping advertisers focused on the lingering issues from the consumer tech giant’s’ attempt to kneecap competitors’ advertising businesses while building its own.

Looking ahead: Our newly updated forecast sees the company’s ad revenues dropping 3.7% in the US this year. 2023 will bring a return to higher revenues, but even then, two-year annualized growth will come to just less than 1%.

• We also expect Meta to experience a worldwide dip in ad revenues this year, but with slightly more robust growth (8.2%) next year.

The TikTok problem: The reason why Facebook purchased Instagram years ago has since become clear: It was the Facebook killer. Now, Instagram is going up against the Instagram killer.

• ByteDance-owned TikTok is waging war on Instagram’s home turf with still photos and images, expanding its character count to promote discoverability, and even looking to build its own fulfillment centers.
• While our forecast still expects Instagram to eke out some growth this year, that’s small consolation for a platform coming off a few years of substantial growth.

Analyst insight: “To return to stronger growth, Meta needs to turn its business around,” said principal analyst Debra Aho Williamson. “As Facebook Inc., it was a revolutionary company that changed the way people communicate and the way marketers interact with consumers. Today, it’s no longer that innovative groundbreaker.”

The big takeaway: All Meta needs to do for us to adjust our Facebook and Instagram numbers upward, and keep advertisers engaged is this: more ad innovation; monetize Reels at a faster rate; solve out-of-control inflation; get Apple to reverse its 2021 changes; greater geopolitical stability' hope that TikTok implodes; and talk less about the metaverse. Then everything will be fine.

Go further: Read our new report, The Future of Meta, which gives readers a two-year look at the company’s fortunes.