Facebook parent Meta reported a steeper-than-expected drop in revenue, missed on earnings and issued a surprisingly weak forecast pointing to a second consecutive decline in year-over-year sales. The shares dropped 3.8% in extended trading.

Here’s how the company did:

• Earnings: $2.46 per share vs. $2.59 per share expected, according to Refinitiv
• Revenue: $28.82 billion vs. $28.94 billion expected, according to Refinitiv
• Daily Active Users (DAUs): 1.97 billion vs 1.96 billion expected, according to StreetAccount
• Monthly Active Users (MAUs): 2.93 vs 2.94 billion expected, according to StreetAccount
• Average Revenue per User (ARPU): $9.82 vs. $9.83 expected, according to StreetAccount

Meta shares have lost about half their value since the beginning of the year, underscoring investor concern about the health of the company’s core online advertising business. That unit has been hurt by Apple’s iOS privacy update last year, limiting Meta’s ability to track users, and by a weakening economy that’s led some companies to slash their ad budgets.

Revenue in the second quarter fell almost 1% from a year earlier. Meta also issued a disappointing third-quarter forecast, citing a “continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty.”

Meta CEO Mark Zuckerberg said on a call with analysts that the company’s Instagram Reels product has also reached a $1 billion annual run rate. Although the company has been heavily pushing Reels, which is similar to the TikTok short video sharing app, Reels doesn’t generate as lucrative of sales asother products like Instagram Stories. This means that if advertisers spend money on Reels, Meta would make less money than if they were to spend money on other products like Stories.

The company said sales in the quarter will be in the range of $26 billion to $28.5 billion, trailing the $30.5 billion average analyst estimate, according to Refinitiv. That translates to a projected decline of between 2% and 11% from a year ago.

Facebook’s troubling results follow a trend started last week by rivals Snap and Twitter. Those companies both reported disappointing second-quarter numbers, and executives cited economic and mobile platform challenges that have permeated the online ad market. The mood had soured so much by this week that shares of Alphabet and Microsoft rose on Wednesday even though both companies missed analysts’ estimates on the top and bottom lines.

Meta said that its headcount increased 32% from a year earlier to 83,553. However, the company indicated earlier in the period that it plans to slow the pace of hiring, echoing the sentiment from many of its tech peers.

The company is also expecting its total expenses in 2022 to be between $85 billion and $88 billion instead of $87 billion to $92 billion indicating that it’s tightening its belt.

Meta’s Reality Labs business unit, responsible for developing the metaverse and related virtual reality and augmented reality technologies, brought in $452 million in sales, but recorded a $2.8 billion loss in the second quarter. That business unit is also projected to generate less money in the third quarter compared to the second, Meta added.

Earlier this week, Meta raised the price of its Quest 2 VR headset by $100, citing rising production and shipping costs. Although Meta is currently the leader in selling VR headsets, the market is still tiny compared to mobile advertising.

And as the company continues to push the idea of the metaverse as part of its corporate rebranding, it’s also spending more on marketing and sales; costs associated with marketing and sales jumped 10% year-over-year to $3.6 billion in its second quarter.

With Facebook struggling to satisfy Wall Street’s demands, Chief Financial Officer David Wehner is taking on a new role of chief strategy officer, overseeing corporate development, the company said. Meta is promoting Susan Li, the company’s current vice president of finance, to be CFO.

Executives will discuss the results with analysts on a webcast starting at 5:00 p.m. ET.

This story is developing.

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