What happened

Meta Platforms (META 1.26%) shares fell hard this week, declining 25% through Thursday trading even as the wider market rose 1.5%. That drop contributed to significant losses for the social media giant, whose shares are down 71% so far in 2022, according to data provided by S&P Global Market Intelligence.

The latest decline was sparked by the company's Wednesday afternoon earnings report, which contained lots of warning signs about Meta's growth rate into 2023.

So what

The company this week revealed modest increases in its user base and higher advertising impressions through the three-month selling period that ended in late September. The base of engaged users grew 4%, roughly the same rate as in the prior quarter.

CEO Mark Zuckerberg highlighted that expansion in his comments, saying in a press release, "our community continues to grow and I'm pleased with the strong engagement we're seeing."

The problem is that the growth rate has slowed significantly, while costs are still soaring. As a result, Meta reported a distressing 46% plunge in operating income as profitability dove to 20% of sales from 36% a year ago.

Now what

Management projected between $30 billion and $32.5 billion of sales in the fourth quarter, making it likely that Meta will report a third consecutive quarter of declining revenue. Other warning signs about the future include elevated marketing spending, mounting losses in the Reality Labs division, and a slow ramp up of the Instagram Reels platform that management hopes will allow it to better compete with rivals like TikTok.

Executives said they are confident Meta will return to a faster growth pace and will emerge from this pullback a stronger company. In the meantime, though, sales are likely to continue looking sluggish while expenses keep pushing profits lower. The stock isn't likely to enjoy a sustained rebound until investors can see concrete signs of stabilizing growth and earnings trends.