Thanks to the extraordinary performance of the advertising department, Meta announced on Wednesday (October 25th) local time that its third quarter revenue increased significantly by 23%, which is the fastest growth rate since 2021.
After the report was released, Meta's stock price rose by over 4% after the market. However, subsequently, after Chief Financial Officer Susan Li made a cautious statement regarding the fourth quarter forecast, Meta's stock price reversed its trend after hours, falling by more than 3%.
The company's earnings per share in the third quarter were $4.39, higher than analysts' expectations of $3.63; The revenue was 34.15 billion US dollars, a significant increase from 27.71 billion US dollars in the same period last year, higher than analysts' expectations of 33.56 billion US dollars; Net profit increased by 164% to $11.58 billion.
Extraordinary performance of advertising business
Advertising revenue from social media platforms remained 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 app series Family of Apps (FoA), including Instagram, Facebook, and WhatsApp, has driven revenue growth.
In terms of user numbers, Meta's daily active users were 2.09 billion, higher than the expected 2.07 billion; The monthly active users are 3.05 billion, with an expected 3.05 billion.
A large part of the reason for Meta's re acceleration seems to be that it has done a good job in improving the effectiveness and targeting of online advertising, thanks to the company's huge investment in artificial intelligence, which has helped it attract retailers who hope to provide targeted promotions to customers.
Data shows that Meta's advertising views increased by 31% in the quarter compared to the same period last year
The company's Chief Financial Officer, Susan Li, told analysts on a conference call that online commerce was the "biggest contributor" to year-on-year growth in advertising revenue, followed by packaged consumer goods and games.
In addition, Meta's business performance outperforms its competitors. Google's parent company Alphabet stated in a report on Tuesday that advertising revenue has increased by approximately 9.5%; The smaller competitor Snap's revenue increased by 5%.
Mark Zuckerberg, CEO of Meta, emphasized in a conference call that "in terms of investment priorities, artificial intelligence will be our largest investment area in 2024, whether in the engineering or computer resources fields
Uncertainty factors in Q4
However, Meta expanded its revenue guidance range for the fourth quarter due to the unpredictability of the Middle East region caused by the Israel Hamas war.
Li said in a conference call, "We have observed that advertising may experience weakness at the beginning of the fourth quarter, which is related to the onset of conflicts, as reflected in our fourth quarter revenue outlook... It is difficult for us to directly attribute the weak demand to any specific geopolitical event
Meta stated that it expects revenue to be between $36.5 billion and $40 billion in the current quarter (fourth quarter), compared to analysts' previous estimate of $38.85 billion.
In addition, Meta stated that expenditure in 2023 will be between $87 billion and $89 billion, lower than the previous forecast of $88 billion to $91 billion. The expenditure in 2024 will be between $94 billion and $99 billion.
There has been no improvement in the Reality Labs department
However, on the other hand, Meta's Reality Labs department, which focuses on virtual reality (VR), augmented reality (AR), and metaverse, suffered an operating loss of $3.74 billion this quarter. Since the beginning of last year, the department has lost nearly $25 billion (after releasing Quest 3 headphones and other new products).
The company also warned that due to ongoing product development efforts in AR/VR and investments to further expand the ecosystem, it is expected that the operating losses of Reality Labs will "significantly increase year-on-year".
Nevertheless, Zuckerberg said, "Our community and business have had a good quarter, and I am proud of the work our team has done in launching the Hybrid Reality Head Display Quest 3, Ray Ban Meta Smart Glasses, and Artificial Intelligence Studio
Debra Aho Williamson, a senior electronics market analyst, stated that Meta's main issue for this quarter remains Reality Labs, which has already experienced a very alarming level of losses and shows no signs of improvement.
The "Year of Efficiency" has been confirmed
As of September 30th, Meta had 66185 employees, a decrease of 24% year-on-year.
Starting from 2022, we have taken several measures to improve efficiency and realign our business and strategic priorities... As of September 30, 2023, we have basically completed our layoff plan and continue to evaluate facility integration and data center restructuring plans
The total costs and expenses for the third quarter decreased by 7% compared to the same period last year, to $20.4 billion, confirming Zuckerberg's announcement of the "Year of Efficiency" in February this year, when he emphasized the need for a more streamlined and flexible workforce.
It is worth mentioning that Meta's stock price has risen by about 150% this year, ranking second among the S&P 500 index components, after artificial intelligence chip manufacturer Nvidia.