Meta (Nasdaq: META), a social media giant that has gradually adjusted its market positioning, outperformed market expectations in the third quarter, with advertising revenue accounting for over 98.5% of total revenue.
On October 25th local time, Meta announced its results for the third quarter of the 2023 fiscal year as of September 30th, with a revenue of $34.146 billion, a 23% increase from the same period last year and higher than the market's expected $33.52 billion; Net profit increased by 164% year-on-year to $11.583 billion; Diluted earnings per share increased by 168% year-on-year to $4.39, higher than market expectations of $3.58.
For Meta, a 23% revenue growth is also the company's largest revenue growth since the third quarter of 2021. Meta predicts that in the next fiscal quarter, the company's revenue will reach between $36.5 billion and $40 billion. If calculated at the midpoint of the forecast range of $38.25 billion, Meta's fourth quarter revenue will increase by 19% year-on-year.
Mark Zuckerberg, CEO of Meta, said, "Our community and business have had a good quarter, and I am proud of our team's work in launching XR (Hybrid Reality) Head Display Quest 3, Ray Ban Meta Smart Glasses, and AI (Artificial Intelligence) Studio
After the day's trading, Meta's stock price rose by over 4% at one point. Since the beginning of this year, Meta's stock price has increased by over 140%, with a total market value of $770.74 billion.
Overview of Meta's revenue for the third quarter. Source: Meta Financial Report
From a business perspective, advertising revenue from social media platforms remains the main component of Meta's revenue in the third quarter, with a year-on-year increase of 24% to $33.643 billion, accounting for over 98.5% of the total revenue. The financial report shows that the Meta application series Family of Apps (FoA), including Instagram, Facebook, and WhatsApp, has driven revenue growth, with revenue reaching $33.936 billion in the third quarter, a year-on-year increase of 24%.
On the other hand, Reality Labs, which is responsible for AR (augmented reality) and VR (virtual reality) businesses, still suffered a huge loss of $3.742 billion in the third quarter, up from $3.672 billion in the same period last year. Since the first quarter of last year, the total loss of the department has been close to $25 billion in the past two years.
Meta also warned in its financial report that due to the company's ongoing product development work in the AR and VR fields and increased investment to expand its ecosystem, it is expected that Reality Labs will experience a "significant year-on-year increase" in operating losses this fiscal year.
Meta's business performance in the third quarter. Source: Meta Financial Report
Debra Aho Williamson, a senior electronics market analyst, stated that the main issue for Meta this quarter remains Reality Labs, with losses reaching alarming levels and no signs of improvement.
At the beginning of this year, after the company laid off tens of thousands of employees, Zuckerberg stated that 2023 would be a "year of efficiency" and would significantly reduce the company's operating costs by opening up resources and reducing costs. The financial report shows that as of the end of the second quarter, the total number of Meta employees decreased by 24% year-on-year to 66185. Meta stated that as of September 30, 2023, the "vast majority" of employees affected by the 2023 layoffs were included in the reported number of employees.
Zuckerberg's pursuit of the "Year of Efficiency" has indeed been effective, with financial reports showing that the company's total costs and expenses in the third quarter decreased by 7% year-on-year to $20.4 billion.
During the conference call, Zuckerberg also reiterated the company's emphasis on AI, stating that in 2024, AI will become Meta's largest investment area in terms of engineering and computing resources. He added that in order to avoid assigning a large number of new employees, the company will lower the priority of some non AI projects and shift relevant personnel to AI work.
Another focus of attention in Meta's current financial report is the Threads platform launched by the company in July this year to compete with X (formerly Twitter). Zuckerberg also posted an article celebrating that Threads had over 100 million users on the fifth day after its launch, breaking the record for chat robot ChatGPT's growth rate. However, after that, as the Threads craze gradually faded, Meta no longer updated platform related information.
During the conference call, Zuckerberg finally mentioned Threads, stating that the current monthly active users of Threads are slightly less than 100 million, and the company's goal is to have 1 billion users on the platform in the future: "I believe that if we can persist in our current state for a few more years, there will be a great opportunity to achieve this vision