Meta Beats Third-Quarter Earnings Estimates, Prioritizes AI Investments

Meta’s third-quarter results exceeded expectations with a 23 percent revenue increase, the highest growth rate since 2021.
Meta Beats Third-Quarter Earnings Estimates, Prioritizes AI Investments
A pedestrian walks in front of a Meta sign at Facebook headquarters in Menlo Park, Calif., on Oct. 28, 2021. Justin Sullivan/Getty Images
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The earnings results published late Wednesday showed Meta Platforms experienced a 23 percent increase in revenue during the third quarter, thanks to its cost -eduction efforts and a resurgence in digital advertising revenues.

Facebook parent company’s revenue for the quarter ended Sept. 30 was $34.146 billion, a 23.21 percent increase from the $27.714 billion in third quarter fiscal year 2022.

Adjusted earnings were $4.39 per share as net income rose 164 percent, to $11.58 billion.

The company outperformed estimates in ad impressions, hitting a 31 percent year-over-year increase instead of the expected 29.6 percent.

Meta’s income from operations rose 142.73 percent year over year, to $13,748 million, compared to $5,664 million in the year-ago quarter.

Meta’s results indicate a 168 percent year-over-year earnings surge and a 23 percent spike in sales.

Meta stock has soared nearly 150 percent so far this year, placing it among the top performers in the S&P 500 Index.

“We had a good quarter for our community and business,” said Mark Zuckerberg, Meta founder and CEO. “I’m proud of the work our teams have done to advance AI and mixed reality with the launch of Quest 3, Ray-Ban Meta smart glasses, and our AI studio.”

Metaverse Suffers Losses With Reality Labs

Meta’s Reality Labs division continued to be a cash-burning endeavor.

The division incurred a loss of $3.75 billion for the third quarter, in contrast to $3.67 billion in the previous year. The metaverse-oriented division saw a 26 percent decline in revenue, totaling $210 million.

In October, the company debuted its newest virtual-reality headset, the Quest 3. The product is available in two versions: one with 128GB storage for $499.99, and another with 512GB storage for $649.99.

Regarding platform Threads, Mr. Zuckerberg said “people love it so far” and expressed hope the network would hit one billion users one day.

Meta Widens Revenue Guidance Range

For the next quarter, Meta is looking to widen its revenue guidance range.

The range, slated to be between $36.5 billion and $40 billion, is higher than the usual amount of $2.5 billion that the company typically offers.

Meta CFO Susan Li attributed the influence of macroeconomic factors, such as the war in the Middle East, on the company’s advertising performances.

“Now in terms of how this translates into impact on the fourth-quarter business, first of all, I should say that coming into the fourth quarter, we’ve been seeing continued strong advertiser demand in key segments, including online commerce and gaming,” said Ms. Li during an investor call.

“But having said that, we are also seeing more volatility at the start of the quarter. That’s in part why we widened our guidance range to capture that uncertainty.”

According to Ms. Li, Meta does not have any “direct material exposure to Israel,” but the company historically witnessed a decrease in demand during other regional conflicts, such as when Russia invaded Ukraine in 2022.

AI Will Be Meta’s Biggest Investment

Regarding investment priorities, Mr. Zuckerberg stated that AI will be Meta’s primary focus in 2024, encompassing both engineering and compute resources.

“This year alone, we’ve seen a 7 percent increase in time spent on Facebook and a 6 percent increase on Instagram as a result of recommendation improvements,” he said.

“Our AI tools for advertisers are also driving results with Advantage+ shopping campaigns, reaching a $10 billion run rate and more than half of our advertisers using our Advantage+ creative tools to optimize images and text in their ads creative.”

He indicated that Meta intends to persist in downgrading various non-AI projects within the organization, prioritizing the engagement of personnel in AI-related initiatives instead.

In 2022, Meta began a comprehensive restructuring process that involved downsizing the workforce and streamlining projects.

These measures aimed to refocus the company’s efforts on enhancing its AI-driven algorithms, enabling more accurate and personalized recommendations.