Meta widens revenue guidance range because of Middle East unpredictability

In Meta’s earnings report on Wednesday, the company gave guidance for the fourth quarter, with a surprisingly wide gap between the low number and the high.

The $3.5 billion range ($36.5 billion to $40 billion) compares to a $2.5 billion range the company typically offers in its quarterly revenue forecast. Susan Li, Meta’s finance chief, told analysts on the earnings call that the reason for the change is the unpredictability in the Middle East due to the Israel-Hamas war.

“We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook,” Li said on the call. “It’s hard for us to attribute demand softness directly to any specific geopolitical event.”

Li said Meta doesn’t have “material direct exposure to Israel,” but she noted that historically the company has “seen broader demand softness follow other regional conflicts in the past, such as in the Ukraine war,” after Russia invaded its neighbor in early 2022.

At the mid-point of its guidance range, Meta would be expecting revenue of $38.25 billion, compared to the average analyst estimate of $38.85 billion, according to LSEG, formerly known as Refinitiv. For the third quarter, Meta beat on the top and bottom lines, boosting its shares in extended trading on Wednesday.

Meta’s commentary surrounding the Middle East conflict, which escalated this month after Hamas attacked Israel, follows cautionary statements from Snap on Tuesday.

Snap said it has “observed pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war in the Middle East,” which is affecting its current quarter’s sales.

As part of Snap’s “internal forecast,” the company said it expects sales in its fourth quarter to be in the range of $1.32 billion to $1.38 billion, compared to $1.33 billion expected by analysts. Snap said it’s not providing official fourth-quarter guidance “due to the unpredictable nature of war.”

President Joe Biden reiterated on Wednesday’s that the U.S. is working to secure the release of all hostages being held by Hamas. Speaking at the White House, he also said there must be a “two-state solution” to the conflict in Israel and Gaza.

Meanwhile, hospitals in Gaza have warned that they would need to shut down if they don’t receive more fuel, as other supplies like water, medicine and food also continue to run low.

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