The Appen Ltd (ASX: APX) share price is out of form on Thursday.
In morning trade, the artificial intelligence data services company's shares are down 7.5% to $9.33.
Why is the Appen share price sinking?
The Appen share price has come under significant selling pressure this morning despite there being no news out of the company.
However, the likely cause for this share price weakness is the release of the quarterly results of one of its biggest customers – Meta (Facebook).
In after hours trade, the social media giant's shares have crashed 23%, wiping over US$200 billion off its market capitalisation.
Wall Street has been selling off Meta's shares after its quarterly revenue and guidance fell well short of expectations. Meta's CEO, Mark Zuckerberg, blamed this partly on inflation and supply chain issues that are impacting advertisers' budgets.
This is where Appen comes into the equation. Meta has traditionally been one of Appen's largest customers along with Google, Microsoft, and Amazon. Facebook uses Appen's services to support its advertising operations. The company's team essentially help teach machines to predict which advertisements will resonate with which users.
So this softer advertising demand could have an impact on Appen's revenues in FY 2022.
In fact, you only need to look at its half year results to see how it can impact its performance. For the six months ended 31 June, Appen posted a 2% reduction in revenue and a 14.3% decline in EBITDA.
At the time, Appen's Chief Executive Officer, Mark Brayan, said: "As expected, our first half results were impacted by our global technology customers' focus on new AI products and applications, as they broaden their revenue base outside of digital advertising and respond to data privacy changes. This resulted in lower ad-related services revenue."
This will make Appen's results for FY 2021 and guidance for FY 2022 later this month worth watching very closely.
