Facebook’s core social network has reported its first sequential decline in daily users, while parent company Meta Platforms warned that Apple’s privacy changes, competition for younger audiences and a shift toward short-form video will weigh on growth in the months ahead.

Meta reported fourth-quarter revenue of $33.7 billion, up 20% from a year earlier, but its earnings release showed Facebook daily active users averaging about 1.93 billion in December. On an unrounded basis, that figure slipped from the prior quarter, marking the first such decline since the company began reporting the metric.

The market reaction was severe. Meta shares fell more than 20% in after-hours trading after the company projected first-quarter revenue of $27 billion to $29 billion, below many analysts’ expectations. The selloff reflected concern that the problems are not merely cyclical: the company is simultaneously confronting a maturing flagship network, a powerful new rival in TikTok, changes to mobile advertising and the enormous cost of building its metaverse strategy.

The user-growth engine is slowing

Facebook’s global scale leaves limited room for easy expansion. Meta said daily active people across its family of apps averaged 2.82 billion in December, while monthly active people reached 3.59 billion. Those totals still grew from a year earlier, but the flagship Facebook service has begun to show the limits of saturation in North America, Europe and other mature markets.

Reuters reported that Facebook daily active users fell from about 1.930 billion in the third quarter to about 1.929 billion in the fourth. The change is small in absolute terms, but symbolically important for a company whose investment case has long been built on steadily expanding audiences and advertiser reach.

Chief Executive Mark Zuckerberg has increasingly identified TikTok as a central competitive threat, particularly among younger users. Meta is responding by promoting Reels, its short-form video product, throughout Facebook and Instagram. But Reels currently monetizes at a lower rate than the established Feed and Stories formats, meaning faster adoption can initially pressure revenue even if it improves engagement.

Apple’s privacy framework is changing digital advertising

Meta’s advertising business is also adjusting to Apple’s App Tracking Transparency rules, which require iPhone users to grant permission before apps can track activity across other companies’ services. The change makes it more difficult for advertisers to measure conversions, target audiences and optimize campaigns using the data infrastructure on which Facebook’s ad platform was built.

Meta’s annual report identifies platform changes by Apple and other companies as a material risk to advertising performance. The company is investing in new measurement and targeting systems designed to work with less individual-level data, but that transition is neither immediate nor cost-free.

Executives discussed those pressures in the company’s quarterly earnings event, where Zuckerberg and Chief Financial Officer Dave Wehner described a business facing multiple simultaneous shifts. Meta expects advertising headwinds from both weaker targeting and a greater share of user time moving toward video formats that generate less revenue per minute.

The metaverse investment is already expensive

The quarter also provides the clearest financial view yet of Zuckerberg’s decision to reorganize the company around the metaverse. Meta now separately reports Reality Labs, the division behind Quest virtual-reality headsets, augmented-reality research and related hardware and software.

Reality Labs generated $877 million in fourth-quarter revenue but posted an operating loss of about $3.3 billion. For the full year, the division lost more than $10 billion. Those figures establish the magnitude of Meta’s wager: the company is using cash generated by its advertising businesses to fund a technology platform that may take years to become commercially significant.

In the earnings call, Zuckerberg argued that immersive computing could become the next major technology platform and said Meta intends to invest heavily to shape it. Investors must therefore judge the company on two time horizons at once—near-term pressure on advertising and user growth, and a long-term effort to create a new market around virtual and augmented reality.

A company at an inflection point

The immediate financial business remains extremely profitable. Meta’s Family of Apps produced more than $32 billion in fourth-quarter revenue, and advertising remains one of the largest and most sophisticated digital marketplaces in the world. Yet the latest results show that scale alone no longer guarantees easy growth.

The Guardian noted that the combination of TikTok competition, Apple’s privacy changes and heavy metaverse spending has forced investors to reassess the company’s growth assumptions. Those pressures are interconnected: Meta is spending more precisely because its mature social products face stronger competition and platform constraints.

The company’s challenge is to make Reels economically productive, rebuild advertising technology around a more privacy-constrained mobile environment and sustain engagement across Facebook and Instagram while funding Reality Labs. If it succeeds, the current quarter may look like the beginning of a transition to a broader technology platform. If it does not, the decline in Facebook daily users could be remembered as a more fundamental signal that the social network’s growth era has peaked.

For the first time in years, Meta is asking investors to accept slower near-term growth and materially higher spending in exchange for a future that remains difficult to quantify. The market’s response this week suggests that bargain will require stronger evidence than the company has yet provided.